During periods when costs are rising and inventory quantities are stable, cost of goods sold will be: O Higher under FIFO than average cost. O Higher under FIFO than LIFO. O Lower under LIFO than FIFO. O Lower under average cost than LIFO.

Question

Zander Swanson

Business

22 July, 05:15

During periods when costs are rising and inventory quantities are stable, cost of goods sold will be: O Higher under FIFO than average cost. O Higher under FIFO than LIFO. O Lower under LIFO than FIFO. O Lower under average cost than LIFO.

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Answers (1)

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Alina Stephens · Answer 1

O Lower under average cost than LIFO.

Explanation:

Whenever the costs are rising and inventory quantities are stable it means that the later that the inventory is bought the more expensive it is because costs are rising and increase with time. So the cost of goods sold will always be the highest under LIFO when costs are rising because, the goods being bought last are the most expensive will be expensed first under LIFO. The costs of good sold will be lowest under FIFO when costs are rising because the cheapest goods will be expensed fist. So in this case the only option that makes sense is that the cost of goods sold will be lower under average cost than LIFO.