A company just starting business made the following four inventory purchases in June: A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand.
The inventory method which results in the highest gross profit for June is
A) the FIFO method.
B) the LIFO method.
C) the weighted average unit cost method.
D) not determinable.

Question

A company just starting business made the following four inventory purchases in June:  A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand.
The inventory method which results in the highest gross profit for June is
A) the FIFO method. 
B) the LIFO method. 
C) the weighted average unit cost method. 
D) not determinable.

Quizplus · Accepted Answer

The FIFO method assumes that the first items purchased are the first items sold, which would result in the highest ending inventory value and therefore the highest gross profit. Since the company just started business in June, it is likely that the beginning inventory was zero, making the FIFO method the most appropriate choice.

A Company Just Starting Business Made the Following Four Inventory