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Part $1$

If unit costs are rising and inventory levels are constant or$$ increasing, which method of inventory valuation will result in the lowest net$$ income? Why?

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Part $1$

A$.$

LIFO includes the most recent costs in cost of goods sold.$$ Therefore, it results in higher cost of goods sold and lower income if prices are increasing. In$$ addition, LIFO includes the$$ older, lower costs in ending inventory. This results in lower inventory valuations than FIFO.

B$.$

$$Moving$-$average method includes the oldest costs in cost of goods sold.$$ Therefore, it results in higher cost of goods sold and lower income if prices are increasing. In$$ addition, moving$-$average method includes the$$ older, lower costs in ending inventory. This results in lower inventory valuations than specific identification method.

C$.$

Specific identification method includes the most recent costs in cost of goods sold.$$ Therefore, it results in higher cost of goods sold and lower income if prices are increasing. In$$ addition, specific identification method includes the$$ older, lower costs in ending inventory. This results in lower inventory valuations than$$ moving$-$average method.

D$.$

FIFO includes the oldest costs in cost of goods sold.$$ Therefore, it results in higher cost of goods sold and lower income if prices are increasing. In$$ addition, FIFO includes the$$ older, lower costs in ending inventory. This results in lower inventory valuations than LIFO.