Which method should be used in inflation status A- FIFO B- LIFO C- weighted average D-no of this answers are correct

Answer: B- LIFO

Firms with the following characteristics should adopt LIFO:

1- Rising prices for raw materials and labor

2- More variable inventory growth

3- An absence of other tax loss carry forwards

4- Large size.

This is to secure the highest tax benefit as during high inflation periods, using LIFO will make costs increase which results in less net income. The reverse applies to a switch to FIFO method