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 value
Could you help me to solve this question?
FAInventory
5y ago
5y ago#1In 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.