Madlock Company,which started business at the beginning of Year 1,selected the FIFO method for its inventory costing.For profits to be maximized for Year 1 under this method,what must purchase prices be doing?

Question

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Under the FIFO (First In, First Out) method, if purchase prices are increasing, the cost of goods sold (COGS) will be based on the older, lower-priced inventory. This results in a higher reported profit because the newer, higher-priced inventory remains in ending inventory, increasing the value of assets on the balance sheet.

Madlock Company,which Started Business at the Beginning of Year 1,selected