The President and CEO of Quinn Manufacturing receives a cash bonus equal to 1% of audited net income during the current year. During a period of rising prices and increasing inventory, which inventory cost flow assumption would measure the smallest compensation expense and greatest cash position for Quinn Manufacturing?

Question

Quizplus · Accepted Answer

LIFO (Last-In, First-Out) results in higher cost of goods sold and lower net income during periods of rising prices, which would minimize the cash bonus based on net income and maximize cash retention.

The President and CEO of Quinn Manufacturing Receives a Cash