If inventory prices are rising:

Question

Quizplus · Accepted Answer

If inventory prices are rising, the LIFO method will give the lowest profit because this method assumes that the most recent inventory purchases are used first for sales. As a result, the cost of goods sold is based on the higher prices of the most recent inventory purchases, which decreases the profit. On the other hand, the FIFO method assumes that the earliest inventory purchases are used first for sales, resulting in a higher cost of goods sold and higher profit. Therefore, if inventory prices are rising, the best choice is to use the FIFO method for higher profit.

If Inventory Prices Are Rising