Question

Indicate whether the FIFO or LIFO inventory costing method would normally be selected when inventory costs are rising. Explain why.

Answer 1

If prices are rising, prefer LIFO. This is because the goods sold have the highest cost and the lowest taxable income. First in, first out, or FIFO, applies the earliest cost first.

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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