When costs to purchase inventory regularly decline, which method of inventory costing will yield the lowest cost of goods sold?
A) Weighted average.
B) Specific identification.
C) LIFO.
D) Gross margin.
E) FIFO.

Question

Quizplus · Accepted Answer

LIFO (last-in, first-out) method assumes that the last inventory purchased is the first to be sold. When costs to purchase inventory regularly decline, this method will result in matching the latest (higher) purchase costs with the corresponding revenue, leading to a lower cost of goods sold and higher ending inventory balances.

When Costs to Purchase Inventory Regularly Decline, Which Method of Inventory