Question

Based on the net income of the shop, the sales staff at Francesca's Fashions receive performance bonuses. In periods of declining prices, which inventory costing method would bring the sales staff the most benefit?
A: average cost
B: LIFO
C: physical inventory method
D: FIFO

Answer 1

Answer:

B: LIFO

Explanation:

Based on the information provided it can be said that in this situation the costing method that would bring the most benefit would be LIFO costing method. This acronym refers to last-in-first-out and describes a method of assuming that the last items that enter an inventory are always the first ones to be sold during that accounting year. This method would provide the most benefit because it usually results in higher cost of goods sold and a lower overall inventory.