When prices are increasing, which inventory method will produce the highest cost of goods sold?
A) FIFO.
B) LIFO.
C) Average.
D) Cost of goods sold will not change.

Question

Quizplus · Accepted Answer

LIFO (Last-in, First-out) assumes that the last items purchased are the first to be sold, therefore during inflationary times, the cost of goods sold will be based on the higher priced items in inventory, resulting in a higher cost of goods sold compared to FIFO (First-in, First-out) and average cost methods.

When Prices Are Increasing, Which Inventory Method Will Produce the Highest