Supply Chain Management Professional (SCMP) · Question
Which inventory valuation method typically results in a higher cost of goods sold (COGS) during periods of rising prices?
LIFO assumes the most recently purchased goods are sold first, leading to a higher COGS in an inflationary environment. This can result in lower taxable income.
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Question: Which inventory valuation method typically results in a higher cost of goods sold (COGS) during periods of rising prices?
Answer options: ✅ LIFO (Last-In, First-Out)
- FIFO (First-In, First-Out)
- Weighted-Average Cost
- Specific Identification
Correct answer: LIFO (Last-In, First-Out)
Explanation: LIFO assumes the most recently purchased goods are sold first, leading to a higher COGS in an inflationary environment. This can result in lower taxable income.
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