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In times of rising prices, the FIFO method of inventory valuation, when compared with the
average cost method of inventory valuation, will usually produce which of the following?A) A higher profit and a lower closing inventory value
B) A higher profit and a higher closing inventory value
C) A lower profit and a l ower closing inventory value
D) A lower profit and a higher closing inventory valueCould you help me to solve this question?
In future you must ask in the Ask the Tutor Forum if you want me to answer – this forum is for students to help each other.
Why are you asking a question for which you do not have an answer? You should be using a Revision Kit from one of the ACCA Approved Publishers – they have answers and explanations
🙂FIFO will give a higher value for inventory because it is using the costs of the most recent purchases and if prices have been rising then the recent purchases will have been at a higher cost.
A higher value for inventory will mean that the cost of sales is lower and therefore the profit will be higher.
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