In an economy that experiences rising prices,the weighted-average method will decrease taxes because of goods sold will be higher and operating income is lower.

Question

Quizplus · Accepted Answer

The weighted-average method calculates the cost of goods sold by averaging the cost of all the inventory units available for sale during the period. As rising prices increase the cost of goods sold, using the weighted-average method will result in a higher cost per unit and thus a lower cost of goods sold. This lower cost of goods sold will lead to a higher gross profit and therefore lower taxes.

In an Economy That Experiences Rising Prices,the Weighted-Average Method Will