The correct answer is: A. Incase of increase in price.
FIFO stands for First In, First Out. It is a method of accounting for inventory that assumes that the first goods purchased are also the first goods sold. This means that the cost of goods sold is based on the cost of the oldest inventory items.
FIFO is a conservative method of accounting, as it results in the lowest possible profit. This is because the cost of goods sold is based on the oldest inventory items, which are typically the lowest-priced items.
FIFO is a good method to use when prices are expected to increase. This is because the cost of goods sold will be based on the lowest-priced items, which will result in a lower profit.
B. Incase of falling price is not a good option for using FIFO. This is because the cost of goods sold will be based on the highest-priced items, which will result in a higher profit.
C. Incase of fixed price is not a good option for using FIFO. This is because the cost of goods sold will be based on the average price of the inventory, which will not reflect the actual cost of the goods sold.
D. None of these is not a good option for using FIFO. This is because FIFO is a good method to use when prices are expected to increase.