In an Inflationary Environment, Which Inventory Cost Flow Method, FIFO

question 82

Essay

In an inflationary environment, which inventory cost flow method, FIFO or LIFO, results in the largest balance in ending inventory?

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Definitions:

Materials Quantity Variance

The difference between the actual quantity of materials used in production and the expected quantity, valued at the standard cost.

Cost Drivers

Factors that cause a change in the cost of an activity; they are the structural determinants of the cost of an operation, influencing the expenses of certain business activities.

Vocational School

An educational institution designed to provide vocational education, or technical skills required to perform the tasks of a particular and specific job.

Revenue Variances

Differences between actual revenue and budgeted or forecasted revenue figures.