Asked by Dashiel Gayle Carreon on Jul 24, 2024
Verified
Produces the highest gross profit when costs are decreasing
A)FIFO
B)LIFO
C)Weighted average
Gross Profit
The financial gain achieved after deducting the cost of goods sold from total sales revenue, not including other operating expenses, interest, or taxes.
Decreasing Costs
A situation where a company experiences a reduction in the total cost of production or operation over time, often through economies of scale or improved efficiency.
FIFO
An inventory valuation method where the first items purchased or produced are considered the first sold, standing for First-In, First-Out.
- Get acquainted with the numerous cost flow theories and their use in assessing inventory value.
Verified Answer
YG
Yalina GrupstraJul 31, 2024
Final Answer :
b
Explanation :
LIFO assumes that the most recent inventory purchases are sold first, which results in higher cost of goods sold and lower ending inventory when costs are increasing. However, when costs are decreasing, LIFO produces the highest gross profit because the older, lower cost inventory is being sold first, resulting in a lower cost of goods sold and a higher ending inventory value.
Learning Objectives
- Get acquainted with the numerous cost flow theories and their use in assessing inventory value.