Multiple choice

Directions: Choose the correct option for the given question:

FIFO method is suitable in time of

  1. rising price

  2. falling price

  3. either (1) or (2)

  4. both (1) and (2)

  5. none of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The First-In, First-Out (FIFO) method assumes that the oldest items are sold first. In times of falling prices, this results in charging the higher (older) costs to the cost of goods sold, which is generally considered conservative.

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