Inventory Methods

Explanation
FIFO (First-In, First-Out) is an inventory costing method that assumes that the first items purchased or produced are the first ones sold or used. This means that the cost of goods sold is based on the oldest inventory, while the ending inventory is based on the most recent purchases. This method aligns with the assumption that costs should be charged against revenue in the order they were incurred, as it ensures that the oldest costs are recognized first.

Explanation
LIFO stands for "Last In, First Out." It is an inventory costing method where the most recent costs incurred are charged against revenue. This means that when calculating the cost of goods sold, the cost of the most recently purchased or produced items is matched against the revenue generated. LIFO assumes that the most recently acquired inventory is sold first, which can result in higher costs being matched against revenue, leading to lower taxable income and potentially lower taxes. Therefore, LIFO is the inventory costing method that charges the most recent costs incurred against revenue.

Explanation
The LIFO (Last In, First Out) costing method assumes that the most recently purchased items are the first ones to be sold. According to the given information, the first sale was for 110 units, which means that the 50 units from the second purchase and 60 units from the first purchase were sold. This leaves us with 40 units from the beginning inventory, 50 units from the third purchase, and 45 units from the second sale. Therefore, the cost of the 35 units on hand at the end of the period would be calculated by adding the cost of the remaining units, which is 40 units at P20 and 35 units at P23, resulting in a total cost of 715.

Explanation
The FIFO (First-In, First-Out) costing method assumes that the first units purchased are the first ones sold. In this case, the cost of the 35 units on hand at the end of the period would be determined by the cost of the most recent purchase, which is P23. Therefore, the correct answer is P23.

Explanation
FIFO (First-In, First-Out) method of costing assumes that the items purchased or produced first are sold first. In a rising price scenario, using FIFO will result in lower cost of goods sold (COGS) as the older inventory with lower costs is sold first, while the newer inventory with higher costs remains in the inventory. This lower COGS will lead to higher net income as the difference between sales revenue and COGS will be greater. Therefore, FIFO will yield the highest net income in a steadily rising price situation.