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:

Question

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FIFO (First In, First Out) assumes that the first goods purchased are also the first goods sold. In a period of rising prices, such as 2013, the earliest goods purchased are assumed to be sold first, leaving the company with the most recently purchased, higher-priced goods in inventory. This results in a higher cost of goods sold and lower net income, which can be minimized by using increasing purchase prices. Therefore, choice A, increasing purchase prices, will maximize profits for 2013 under the FIFO method.

Madlock Company,which Started Business at the Beginning of 2013,selected the FIFO