Which one of the following methods of inventory costing yields highest taxable income?
A
FIFO
B
LIFO
C
AVCO or averrage cost
D
Standard cost method
Correct Answer: FIFO
FIFO methods of inventory costing yields highest taxable income. First-in, first-out, or FIFO, applies the earliest costs first. In rising markets, FIFO yields the lowest cost of goods sold and the highest taxable income.