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which inventory methods can produce more net income.

which inventory methods can produce more net income.

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Answer #1
  1. There is no as such hard and fast rule that a particular type of inventory valuation may produce more net income. It totally depends upon the inflation that is price of the raw materials.
  2. In case of inflation, when prices of the raw material are increasing, FIFO method will give more profit than other other two methods.
  3. In case of deflation, when prices of raw material are falling, LIFO method will give more profit than other two methods of valuing inventory.
  4. If there is no change in the prices of the inventory than all 3 methods would give same level of profit.
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