In a period of inflation (prices are rising), which inventory cost formula will result in higher profit?
A)FIFO
B)average cost
C)Cost of goods sold for the period will be the same under both formulas.
D)There would be no effect on profit.

Question

Quizplus · Accepted Answer

In a period of inflation, FIFO (First-In-First-Out) inventory cost formula will result in higher profit because it assumes that the items purchased first are sold first. As a result, cost of goods sold will reflect the lower cost of the older inventory, leading to a higher profit due to the inflationary market conditions.

In a Period of Inflation (Prices Are Rising), Which Inventory