Assuming prices are decreasing,the first-in-first-out approach to inventory valuation,compared to the average cost approach,will give:

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In a scenario where prices are decreasing, the first-in-first-out (FIFO) approach to inventory valuation will result in older, higher-cost inventory being sold first. This leads to a lower profit because the cost of goods sold (COGS) will be higher compared to selling cheaper, more recently acquired inventory. Additionally, the closing inventory will be valued at the lower, more recent prices, resulting in a lower closing inventory value compared to the average cost approach, which smooths out price fluctuations over time.

Assuming Prices Are Decreasing,the First-In-First-Out Approach to Inventory Valuation,compared to the Average