Question

What impact does LIFO inventory valuations have on Gross Profit when prices are rising?

Please no handwritten answers. I do nto want to translate handwriting.

Answer 1

Answer)

LIFO inventory valuation system helps having less profit when prices are rising.This is because rising prices refers to rise in cost of inventory but not selling price.With showing low cost price as inventory at the end of period results in decreasing of profit as compared FIFO and Weighted average method as in FIFO the high value item will be the closing stock as it is the high cost item as prices are raising.Weighted average method will show high value item compared to LIFO although it is lower than FIFO as the high price hike will be ahred with other units.When it comes to LIFO the least cost item will be the closing stock an dhence results in low profit.