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Which of the following statements would be TRUE if raw materials prices were rising?
1) FIFO would give a lower profit figure than LIFO
2) Under LIFO production costs would be lower than under FIFO
3) Periodic weighted average would give a lower closing inventory valuation than the
cumulative weighted average pricing method
4) LIFO would give a lower closing inventory valuation than FIFOThe correct answer is 4 but it seems ans 3 is also correct am i right?
it comes in the hub of acca..ma14 is not the correct answer. Lifo means that higher priced inventory is used first, leaving earlier, lower priced inventory in stocks.
yes u r right…and ans 4 is also saying the same thing..please read througly..and this is acca’s question no chance of wrong
Yes, you are correct. Sorry for my error.
In 3 the WA periodic cost is calculated right over the period, so will always include effects of old, low-priced purchases.
The WA cumulative cost is calculated every time there is an addition of goods. However it would be possible for invemtory to have been reduced to zero at somepoint so that the calculation starts anew having only recent relatively expensive purchases in it.
Therefore, there is a chance that
WA cumulative > WA periodic. Or
WA periodic < WA cumulativeSo it looks as though 3 is right too, as you suggested.
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