Based upon the preceding data, would you expect the inventory to be higher or lower using the last-in, first-out method?

Ex 6-3 perpetual inventory using fifo

Based on the preceding data, it would be reasonable to expect the inventory to be lower using the last-in, first-out (LIFO) method. LIFO is an inventory valuation method used to measure the cost of goods sold and determine a company’s gross profit margin. It assumes that items are sold in reverse chronological order with the most recent items being sold first. This means that any items in inventory that were purchased at a higher price will be recorded as having been sold first and thus reducing their value over time.

For example, if a company has 5 units of product A with one unit purchased each month for five months at prices $50, $45, $40, $35 and $30 respectively then under LIFO method when fifth unit gets sold first due its purchase being most recent one within entire lot , cost associated this particular transaction would only amount 30 dollars instead 50 which would have been case had procedure followed through FIFO model i.e First In First Out leading towards higher total monetary value achieved by organization itself . As such , utilizing last-in first-out approach helps lower overall costs incurred by business during course different transactions taken place but can lead towards issues like outdated stock present within inventory values due lack timely rotation taking place throughout year based upon fluctuating market demand during particular period under consideration here today . Ultimately , it is up individual companies decide which methodology works best them depending upon unique circumstances faced by organization itself moving forward into future events yet come across horizon anytime soon.