APICS Certified in Planning and Inventory Management (CPIM 8.0) CPIM-8.0 Question # 172 Topic 18 Discussion
CPIM-8.0 Exam Topic 18 Question 172 Discussion:
Question #: 172
Topic #: 18
In times of monetary inflation, which of the following methods of inventory valuation results in the greatest cost of sales for the early years of a particular product?
In inflationary environments, LIFO assigns the most recent (higher) costs to the cost of goods sold, resulting in higher COGS and lower taxable income. FIFO does the opposite, leading to lower COGS and higher profits.
“When inflation occurs, the LIFO method results in higher cost of goods sold because it uses more recent, higher-cost inventory values.”
— CPIM Practice Questions, Inventory Valuation (DSP Page 97)
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