Question

In a period of rising​ prices, what is the main advantage of management using the FIFO method compared to the LIFO or​ weighted-average method?

Answer 1

The main advantage of management using the FIFO method in a period of rising prices is that it helps in valuing inventory at lower costs.

Step-by-step explanation:

In a period of rising prices, the main advantage of management using the FIFO (First-In, First-Out) method compared to the LIFO (Last-In, First-Out) or weighted-average method is that it helps in valuing inventory at lower costs. FIFO assumes that the items that were purchased or produced first are sold or used first, resulting in the remaining inventory being valued at the most recent, higher prices. This can be beneficial during rising prices as it reduces the cost of goods sold and increases the value of ending inventory.