FIFO stands for First In First Out and LIFO stands for Last In First Out. Answer: LIFO produces more favorable cash flow because LIFO PRODUCES LOWER INCOME TAX EXPENSE. During inflation, LIFO approach is adopted for tax benefits. With the rise in prices, LIFO produces higher cost of sold amounts of goods.
Explanation: Engines for the cars is a cost directly related to the Ford cars being produced. The property taxes and the janitors rates are indirect costs because they are general costs needed to run the business but are not directly linked to the production of the ford cars
