Final answer:
The common advantage of using last-in, first-out (LIFO) inventory evaluation is a reduction in income taxes due to matching high-cost inventory with current high prices.
Step-by-step explanation:
The reading material mentions that a common advantage of using last-in, first-out (LIFO) inventory evaluation is the reduction of income taxes. When a company uses LIFO, it assumes that the most recently purchased inventory is sold first. Since the cost of inventory tends to increase over time due to inflation, using LIFO allows a company to match high-cost inventory with current high prices, resulting in lower reported profits and lower income taxes.
For example, let's say a company initially buys products for $10 each. Over time, the cost of products increases to $15 each. If the company sells products for $20 each, using LIFO would allow them to match the $20 selling price with the $15 cost, resulting in a profit of $5 per unit and lower income taxes.
Therefore, the common advantage of using LIFO inventory evaluation is a reduction in income taxes due to matching high-cost inventory with current high prices.