In times of inflation,which cost flow assumption provides the highest inventory asset?
A) FIFO
B) Moving weighted average
C) LIFO
D) It depends on the rate of inflation

Question

Quizplus · Accepted Answer

In times of inflation, the cost of materials and goods is expected to increase over time. Under the FIFO cost flow assumption, the first items purchased or produced are assumed to be the first sold, which means that the inventory on hand is made up of the more recently purchased or produced items that have higher costs. This results in a higher inventory asset value compared to LIFO or moving weighted average, where the older or lower cost items are assumed to be sold first. Therefore, A) FIFO is the best choice in times of inflation.

In Times of Inflation,which Cost Flow Assumption Provides the Highest