Question

Which of the following inventory costing methods results in the lowest value of ending inventory during a period of rising inventory costs?
a. First - in, first - out
b. specific identification
c. weighted - average
d. last-in, first-out

Answer 1

Answer:

d

Explanation:

LIFO means last in first out. It means that it is the last purchased inventory that is the first to be sold.

If the LIFO method is used, the goods sold would be the more expensive ones while the ending inventory would consist of older inventories that are cheaper

For example, the following inventory were bought :

Jan 1 5 units of metals at $200

Jan 2 5 units of metals at $250

5 units are sold

If the LIFO method is used, the ending inventory would be the 5 units of metals purchased in jan 1 at $200