If FIFO method is applied in case of rising prices inflation ........

Costing - Phase (I & II) Basics of Cost Control and Analysis

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If FIFO method is applied in case of rising prices (inflation):

It will provide lowest value of closing stock and low profit

It will provide highest value of closing stock and high profit

It will provide highest value of closing stock but lowest value of profit

It will provide highest value of profit but lowest value of closing stock

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Explanation:

In FIFO, material purchased first is consumed first and thus the closing stock represents the material purchased later than that i.e. current price, which is issued. This method uses the cost of the first batch of material purchased for all issues until all material from this batch is completely issued. After the first batch of material is fully exhausted, the cost of the next batch becomes the issue price. So, value of closing stock is high and so resulting profit is also high