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Between LIFO and FIFO, which inventory valuation method gives a better estimate of the replacement cost...

Between LIFO and FIFO, which inventory valuation method gives a better estimate of the replacement cost of inventory when prices are fluctuating? Why?

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Answer #1
We know that LIFO (Last in first out) is a method of inventory valuation wherein as the name suggests that inventory which are purchased most recently is used for consumption/sales and inventory which are purchased earlier stays until most recent stocks are consumed. In FIFO (First in first out) method of inventory valuation the inventories which are purchased earlier is consumed i.e. most recent purchases remain. Therefore, it can be convicingly said that FIFO method of inventory valuation gives a better estimate of the replacement cost (i.e. cost to rebuy the same goods) of inventory when prices are fluctuating as most recent stock would remain piled up in the inventory and would therefore provide a better estimate.
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