Two companies report the same cost of goods available for sale but each employs a different cost formula. If the price of goods has increased during the period, then the company using
A) Average will have the highest ending inventory.
B) FIFO will have the highest cost of good sold.
C) FIFO will have the highest ending inventory.
D) Average will have the lowest cost of goods sold.

Question

Quizplus · Accepted Answer

When prices are rising, the FIFO (First In, First Out) method results in the highest ending inventory value because the most recently acquired (and thus more expensive) items remain in inventory.

Two Companies Report the Same Cost of Goods Available for Sale