Vidyalelo
Commerce · Q86

Costing

Graduate and Post Graduate · Commerce · question 86

Q86

LIFO method of pricing of materials is more suitable when _________.

A.
material prices are rising
Answer
B.
material prices are falling
C.
material prices are constant
D.
material prices are fluctuating

Answer: Option A

Solution

Answer: Option A
Solution:
LIFO method of pricing of materials is more suitable when material prices are rising. LIFO method of pricing issues is suitable because materials are issued at the current market prices which are high. This method thus helps in showing a lower profit because of increased charge to production during periods of rising prices and lower profit reduces burden of income-tax.