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Most of hemlock co competitor value their inventory using AVCO whereas Hemlick co used FIFO. The value of hemlock co inventory at 30september 20X3 on FIFO basis is 40$m. However on Avco basis it would be valued at $36million. By adopting the same method avco as its competitors the assistant accountant says the company would improve its profit for the year ended 30september 20X3 by $4m. Hemlock inventory at 30september 20X2 was reported as $30m. However on Avco basis it would have been reported as 26.8$m.
What will be the effect of the change on profit for the year ended 30september 20X3.
A) increase by 800000$
B)reduced by 800000$
C)increased by 3200000$
D)reduced by 3200000$
Can you please explain the question sir??
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