During Deflationary Periods, the Use of the LIFO Method of Costing

question 28

True/False

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

---

Definitions:

Total Variable Costs

The sum of all costs that vary directly with the level of production or sales volume, such as materials and labor costs.

Variable Costing Income Statement

An income statement format that only includes variable costs as cost of goods sold and uses contribution margin to analyze profitability.

Absorption Costing Format

An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.

Gross Margin

Gross margin is a company's net sales revenue minus its cost of goods sold, representing the efficiency of a company in managing its direct costs.