Assuming inflation,the weighted-average method will result in a net income that is higher than LIFO.

Question

Quizplus · Accepted Answer

The weighted-average method averages the cost of goods sold and ending inventory, thus smoothing out the effect of price changes. In times of inflation, this can result in a lower cost of goods sold and a higher inventory value, which in turn increases net income. LIFO, on the other hand, matches the most recent, higher costs with sales and results in a lower ending inventory value, which can decrease net income. Therefore, in times of inflation, the weighted-average method will generally result in a net income that is higher than LIFO.

Assuming Inflation,the Weighted-Average Method Will Result in a Net Income