When inventory prices are increasing, the FIFO costing method will generally yield a cost of goods sold that is:

Question

Quizplus · Accepted Answer

When inventory prices are increasing, FIFO method assumes that the oldest inventory is sold first and as a result, the cost of goods sold will reflect the oldest, lower priced inventory. This results in a higher ending inventory value, leading to a lower cost of goods sold and a higher gross profit compared to LIFO method. Therefore, the cost of goods sold under the FIFO method will generally be lower than cost of goods sold under the LIFO method.

When Inventory Prices Are Increasing, the FIFO Costing Method Will