Which inventory costing method might allow a company to manipulate income by making significant inventory purchases at year end?

Question

Quizplus · Accepted Answer

LIFO (last in, first out) is a cost flow assumption where the most recently purchased inventory is sold first. This method may allow a company to manipulate income by making significant inventory purchases at year end, as the cost of goods sold would be calculated based on the newer, higher priced inventory, resulting in a lower taxable income. Therefore, LIFO is the best choice for this situation.

Which Inventory Costing Method Might Allow a Company to Manipulate