Madlock Company, which started business at the beginning of 2013, selected the FIFO method for its inventory costing. In order to maximize profits for 2013 under this method, purchase prices must be

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Under the FIFO method, the cost of goods sold is based on the cost of the oldest inventory items first. Therefore, if purchase prices are increasing, the cost of goods sold will be lower, resulting in higher profits for the year. So, Madlock Company should select increasing purchase prices to maximize profits for 2013 under the FIFO method.

Madlock Company, Which Started Business at the Beginning of 2013