Question

In a period of rising​ prices, the FIFO method will result in the highest cost of goods sold for the period.

a) True
b) False

Answer 1

The FIFO method does not result in the highest cost of goods sold in a period of rising prices.

Step-by-step explanation:

The statement "In a period of rising prices, the FIFO method will result in the highest cost of goods sold for the period" is False.FIFO stands for First-In, First-Out, which is a method of inventory valuation. Under the FIFO method, the oldest inventory is assumed to be sold first, which results in the cost of goods sold (COGS) being based on the prices of the earliest purchases.In a period of rising prices, the FIFO method will result in a lower COGS compared to other inventory valuation methods, such as LIFO (Last-In, First-Out) or average cost, because the older inventory is valued at lower purchase prices.