Which statement about FIFO, LIFO, and Weighted Average is true?

• A. LIFO is permitted under IFRS and often increases ending inventory values.
• B. FIFO assigns oldest costs to COGS and newest costs to ending inventory.
• C. Weighted Average results in COGS equal to the exact physical flow.
• D. FIFO, LIFO, and Weighted Average all yield exactly the same COGS in every situation.

Answer: (B)

Cost flow methods determine which purchase costs move to COGS and which stay in ending inventory. Under FIFO, the first items purchased are the ones sold first, so the oldest costs become COGS while the most recent costs remain in ending inventory. This is why FIFO ends up with ending inventory reflecting the latest prices and COGS showing the older, lower costs (in rising price scenarios). The statement captures this relationship precisely.

The other ideas don’t fit: LIFO is not allowed under IFRS, so saying it’s permitted under IFRS is incorrect. Even when prices rise, LIFO typically pushes higher costs into COGS and leaves lower-cost items in ending inventory, contrary to the claim about ending inventory values. The weighted-average method blends all costs into a single average and applies that average to both COGS and ending inventory, so it does not track the exact physical flow of specific units. Finally, the three methods do not produce identical COGS in every situation; changing prices and quantities will yield different results under each method.