2. Inflation happens, actually it’s pretty constantly happening. Let’s say you purchase a batch of dog food in May for $4,000. Come June when you are going to purchase another batch for your inventory, the prices have risen to over $6,000. Using FIFO, you would be selling off the batch from May before you sell off the batch from June, right? So now you can sell the batch from May for the current inflated market price which reduces the impact of inflation on the company.