Question

Indicate whether the FIFO or LIFO inventory costing method normally produces the following effects under the listed circumstances.
(a) Declining costs Highest net income _____ Highest inventory _____

Answer 1

Declining costs Highest net income LIFO Highest inventory LIFO.

Core paper. The last-in-first-out (LIFO) method assumes that the last unit to arrive in inventory, or the newest unit, will be sold first. The first in, first out (FIFO) method assumes that the oldest SKUs are sold first. FIFO inventory calculation assigns the last acquisition cost to the manufacturing cost.

FIFO (First In, First Out) Inventory Management evaluates inventory to reduce the likelihood of business losses when products are phased out or discontinued. LIFO (last in, first out) inventory management is suitable for non-perishable goods and uses the current price to calculate the cost of goods sold.

Learn more about LIFO at

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