Similar to the example of FIFO and LIFO inventory accounting methods depicted in the Connecting with Small Business box titled,"LIFO or FIFO?" a college store purchased sweatshirts for the upcoming fall semester.Using the following data,where a total of 100 sweatshirts were purchased by the store and placed in inventory,select the correct statement from the following choices.

Question

Quizplus · Accepted Answer

Assuming that the cost of each sweatshirt is the same, if the store sells the sweatshirts in the order they were purchased (FIFO), the first 50 sold would have a lower cost of goods sold (COGS) than the last 50 sold. This would result in a higher profit margin for the first 50 sold, as their revenue minus their lower COGS would be greater. Therefore, using FIFO would provide the most profit.

Similar to the Example of FIFO and LIFO Inventory Accounting