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Asked by Jerry Simmons on May 13, 2024

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During periods of decreasing costs, the use of the LIFO method of costing inventory will result in a lower amount of net income than would result from the use of the FIFO method.

Decreasing Costs

A situation where the expenses of producing a good or service fall over time, typically due to efficiency improvements or economies of scale.

LIFO Method

An inventory valuation method called "Last In, First Out," where the cost of the most recently purchased items is the first to be expensed as cost of goods sold.

Net Income

Refers to the total earnings or profit of a company after subtracting all expenses and costs from its total revenue.

  • Learn about the positive and negative implications of deploying various inventory costing options (LIFO, FIFO) under different expense conditions.
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Sophie TrotterMay 17, 2024
Final Answer :
False
Explanation :
During periods of decreasing costs, the LIFO (Last In, First Out) method would result in a higher cost of goods sold (because the most recently acquired, cheaper items are sold last), leading to a higher net income compared to the FIFO (First In, First Out) method, which would report lower costs of goods sold (since the older, more expensive items are sold first).

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