[Parvathy3]

Closing inventory may be valued using first-in, first-out (FIFO) or average cost (AVCO).

Which of the following statements is true assuming that prices have fallen throughout the
year?

A Closing inventory and profit are higher using FIFO rather than AVCO
B Closing inventory and profit are lower using FIFO rather than AVCO
C Closing inventory is higher and profit lower using FIFO rather than AVCO
D Closing inventory is lower and profit higher using FIFO rather than AVCO

The right option is B, can I get an explaination for this?

[Author]

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