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If the costs of materials keep on rising over the period, the FIFO method results in a lower cost of goods sold at the end of the period, thus higher profits although this also indicates higher income taxes. The LIFO method will result in a higher amount for the cost of goods sold resulting in lower profits and consequently lower income taxes. The Weighted average method will always give a figure that is between the FIFO and LIFO amounts (Weygandt et al. 2010). The opposite of these phenomena will happen in times of falling prices.
Therefore if Yang Corporation wants to show an increase in net income for the year, inventory costing should be done using the FIFO method since the trend witnessed is that of rising prices. The FIFO method will reduce the cost of goods sold thus a greater profit will be realized and this translates to increased net income in the books of accounts.
References
Walther Larry (2008). Principles of Accounting. Retrieved from
https://www.principlesofaccounting.com/chapter-8/inventory-costing-methods/
Weygandt J., Kieso D., Kimmel P. (2010). Financial Accounting: IFRS . John Wiley & Sons.
