Under inflationary conditions, LIFO (Last-In, First-Out) accounting method will lead to lower profit. Let's understand why:

LIFO Method:
LIFO is an inventory valuation method in which the last items purchased are assumed to be sold first. In other words, the cost of goods sold (COGS) is calculated based on the cost of the most recently acquired inventory.

Effects of Inflation:
Inflation refers to the general increase in prices of goods and services over time. During inflation, the prices of raw materials and inventory tend to rise. This means that the cost of goods purchased later will be higher than the cost of goods purchased earlier.

Impact on Inventory Valuation:
Under LIFO, the cost of goods sold is calculated using the cost of the most recent inventory, which is assumed to be at a higher price due to inflation. As a result, the COGS will be higher compared to other inventory valuation methods like FIFO (First-In, First-Out) or average cost.

Impact on Profit:
Since COGS is higher under LIFO, it reduces the gross profit margin. Gross profit is calculated by deducting COGS from the net sales. With higher COGS, the gross profit decreases, leading to a lower profit.

Explanation of Option 'C':
Option 'C' states that LIFO will lead to lower profit. This is because the higher cost of goods sold under LIFO reduces the gross profit margin, resulting in lower profit.

Inflationary conditions increase the cost of inventory and impact the profitability of a company. By using the LIFO method, the company assumes that the most recent inventory is sold first, which is valued at a higher price. This increases the cost of goods sold and reduces the profit margin.

Hence, under inflationary conditions, LIFO will lead to lower profit (option 'C').