During a period of rising costs, the manager of a company wishing to maximize her bonus would select which of the following cost ﬂow assumptions?

Question

Quizplus · Accepted Answer

During a period of rising costs, using the FIFO (First-In, First-Out) cost flow assumption typically results in lower cost of goods sold (COGS) because the older, lower-cost items are recorded as sold first. This leads to higher reported profits, which could maximize the manager's bonus if it is tied to profitability.

During a Period of Rising Costs, the Manager of a Company