Response to the following questions:
1. Which of the three methods of inventory costing-fifo, lifo, or average cost-will in general yield an inventory cost most nearly approximating current replacement cost?
2. If inventory is being valued at cost and the price level is steadily rising, which of the three methods of costing- fifo, lifo, or average cost-will yield the lowest annual income tax expense? Explain.
3. Do the terms fifo and lifo refer to techniques used in determining quantities of the various classes of merchandise on hand? Explain.