Xu Corp.started business at the beginning of 2016.Xu selected the FIFO method for its inventory.In order to maximize its profits for 2016 under this method, prices must be
A) Stable
B) Decreasing
C) Increasing
D) Fluctuating up and down at the same amount consistently over the year

Question

Quizplus · Accepted Answer

Under the FIFO method, the cost of goods sold is calculated by using the cost of the oldest inventory first, which leads to higher profits if prices are increasing. Therefore, Xu Corp should choose the increasing prices option to maximize their profits for 2016.

Xu CorpStarted Business at the Beginning of 2016