Because LIFO uses older costs for inventory,in times of rising units costs:
A)LIFO results in a higher book value of inventory and lower inventory turnover ratio than FIFO.
B)LIFO results in a lower book value of inventory and lower inventory turnover ratio than FIFO.
C)LIFO results in a higher book value of inventory and higher inventory turnover ratio than FIFO.
D)LIFO results in a lower book value of inventory and higher inventory turnover ratio than FIFO.

Question

Quizplus · Accepted Answer

When unit costs are rising,FIFO produces a higher inventory value (when compared to LIFO.The inventory turnover is calculated by dividing cost of goods sold by average inventory.Since LIFO produces a lower inventory value when unit costs are rising (which means the denominator would be lower),LIFO would result in a result in a higher inventory turnover ratio.

Because LIFO Uses Older Costs for Inventory,in Times of Rising