Of the three cost-flow assumptions, FIFO results in the least fluctuation in gross margins in businesses in which selling prices tend to change as acquisition costs of inventories change.

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LIFO (Last In, First Out) tends to result in less fluctuation in gross margins when prices are changing because it matches the most recent costs to current revenues. FIFO (First In, First Out) can lead to higher fluctuations in gross margins as older, potentially lower-cost inventory is sold, possibly not reflecting current market prices.

Of the Three Cost-Flow Assumptions, FIFO Results in the Least