Final answer:
The statement is True: When costs per unit are increasing, using the LIFO method indeed results in a lower income tax expense by increasing COGS and consequently lowering reported net income.
Step-by-step explanation:
The statement is True: When costs per unit are increasing, the inventory costing method that results in the lower income tax expense is the LIFO (Last-In, First-Out) method. The LIFO method assumes that the most recently acquired items are sold first.
Thus, during periods of rising prices, the cost of goods sold (COGS) will reflect higher costs associated with more recent purchases, leading to a lower reported net income compared to other inventory costing methods. This in turn leads to a lower income tax liability since income taxes are calculated on the net income.
On the contrary, in the case of deflation, or decreasing costs, LIFO would lead to a higher tax expense.