LIFO inventory value is often less than the inventory's replacement cost because LIFO inventory is valued using the oldest purchase cost.

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LIFO (Last-In, First-Out) inventory valuation method assumes that the last goods purchased are sold first, which means that the ending inventory value is based on the oldest (first) purchase cost. This can result in a lower inventory value compared to the replacement cost, especially if the prices have increased over time.

LIFO Inventory Value Is Often Less Than the Inventory's Replacement