A business is experiencing increasing costs for its stock over time - HSC - SSCE Business Studies - Question 18 - 2013 - Paper 1

Given the scenario, where the business experiences increasing costs for stock over time and aims to maximize profit, the most effective strategy would be:

First-in-first-out (FIFO)

Using the FIFO method allows the business to sell older stock first, which is usually acquired at a lower cost. As a result, when prices are rising, FIFO helps to minimize the cost impact on profits. This ensures better profit margins as the newer, more expensive inventory remains unsold longer. Therefore, adopting FIFO will best address the need to maximize current profits in the context of increasing costs.