Question

Which inventory costing method results in the lowest ending inventory during a period of rising merchandise inventory cost?

A. Weighted-average
B. Specific identification
C. First-in, first-out (FIFO)
D. Last-in, first-out (LIFO)

Answer 1

The LIFO inventory costing method results in the lowest ending inventory during a period of rising merchandise inventory cost.

Step-by-step explanation:

The inventory costing method that results in the lowest ending inventory during a period of rising merchandise inventory cost is the Last-in, first-out (LIFO) method.

In the LIFO method, the assumption is that the last items purchased are the first to be sold or used, which means that the oldest inventory is left at the end of the accounting period.

For example, if a company purchases 100 units of inventory at a price of $10 each and then purchases another 100 units at a price of $15 each, under LIFO, the cost of goods sold would be calculated using the $15 units first and the ending inventory would be valued at the lower cost of the $10 units.