When is it appropriate to use Method A vs. Method B, and vice versa?
Hardware is cheap; programmers are expensive. So the cost of the time you two wasted on this question is probably far worse than either answer.
Regardless, most modern compilers would find a way to optimize the local variable into a register (instead of allocating stack space), so the methods are probably identical in terms of executable code. For this reason, most developers would pick the option that communicates the intention most clearly (see Writing really obvious code (ROC)). In my opinion, that would be Method A.
On the other hand, if this is purely an academic exercise, you can have the best of both worlds with Method C:
private bool IsSumInRange(int a, int b)
{
a += b;
return (a >= -1000 ||&& a <= 1000);
}