When the cost of raw materials is increasing, FIFO accounting
A)yields higher ending inventory values than LIFO.
B)produces higher unit sales than using LIFO.
C)yields higher cost of goods sold than LIFO.
D)All of the options.

Question

Quizplus · Accepted Answer

When the cost of raw materials is increasing, FIFO accounting yields higher ending inventory values than LIFO. This is because FIFO assumes that the earliest goods purchased are the first ones sold, leaving the most recently purchased goods in inventory. As the cost of raw materials increases, the value of the inventory under FIFO also increases because it is assumed that the most expensive goods are still in inventory. Therefore, A is the best choice.

When the Cost of Raw Materials Is Increasing, FIFO Accounting