If prices are rising (inflation), LIFO results in the lowest net income and lower taxes

The economy generally experiences some inflation

Lower inventory levels are favorable because many firms have to pay property taxes on the amount of inventory on hand

Example:

Purchase #1 @ $.10

Purchase #2 @ $.50

Purchase #3 @ $.90

Assume that one unit of material is sold @ $1.00

Determine the net income and ending inventory under each method

	FIFO	Moving Avg.	LIFO
Net Sales
CGS
Gross Margin
Operating Exp	.08	.08	.08
EBT
Taxes (50%)
Net Income
Inventory