OPERATING PROFIT

214. Which of the following current year events would explain a fall in an entity’s operating
profit margin compared to the previous year?
A An increase in gearing leading to higher interest costs
B A reduction in the allowance for uncollectable receivables
C A decision to value inventory on the average cost basis from the first in first out (FIFO)
basis. Unit prices of inventory had risen during the current year
D A change from the amortisation of development costs being included in cost of sales
to being included in administrative expenses

ANS- C
Use of average cost gives a higher cost of sales (and in turn lower operating profit) than FIFO
during rising prices.

Good day,Please I don’t understand why the answer is not A. I’ll appreciate if you can explain better