Question

Which inventory costing method results in the lowest net income during a period of rising inventory​ costs?.

Answer 1

Due to the greatest cost of goods sold, the LIFO (Last In Last Out) technique displays the lowest net profitability. Compared to the other techniques of inventory valuation, the cost of goods sold for the LIFO approach is the greatest.

Which technique of inventory valuation will result in the lowest net profit?

The application of LIFO will produce the lowest net income and the greatest estimated cost of goods sold among the three options during periods of inflation.

Which method of inventory has the lowest income tax rate?

LIFO is the inventory cost flow method that yields the lowest income tax liability. A form of inventory cost flow mechanism called last-in-first-out (LIFO) operates under the presumption that the last item acquired will be the first item to be sold.

In an era of inflation, which inventory method results in the lowest income tax?

Due to increasing COGS, LIFO leads to reduced net income (and taxes). However, under LIFO during inflation, there are fewer inventory write-downs. Results from average cost are in the middle of FIFO and LIFO.

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