- CFA Exams
- CFA Level I Exam
- Topic 3. Financial Statement Analysis
- Learning Module 22. Inventories
- Subject 6. Financial Analysis of Inventories
CFA Practice Question
Which inventory cost flow assumption normally will yield the highest cost of goods sold during a period of declining prices?
B. FIFO
C. LIFO
A. Weighted average
B. FIFO
C. LIFO
Correct Answer: B
The older, higher inventory purchases will be the costs that go into cost of goods sold under FIFO.
User Contributed Comments 6
| User | Comment |
|---|---|
| Stace | Definitely B |
| treakj | But only if the first purchase cost is lower than the recently purchased cost, isnt it? Otherwise the LIFO would still show a higher COGS. |
| surob | treakj: if not given, assume the price is rising. |
| ddrmax | declining pricing.... |
| ericczhang | "...during a period of declining prices" |
| johntan1979 | FEE-FI-FO-FUM! |