Match each description to the appropriate cost flow assumption (a-c).
-Produces the highest gross profit when costs are decreasing
A)FIFO
B)LIFO
C)Weighted average

Question

Quizplus · Accepted Answer

LIFO assumes that the most recent inventory purchases are sold first, which results in higher cost of goods sold and lower ending inventory when costs are increasing. However, when costs are decreasing, LIFO produces the highest gross profit because the older, lower cost inventory is being sold first, resulting in a lower cost of goods sold and a higher ending inventory value.

Match Each Description to the Appropriate Cost Flow Assumption (A-C)