Company A is identical to Company B in every regard except that Company A uses FIFO and Company B uses LIFO.In an extended period of rising inventory costs,Company A's gross profit and inventory turnover,compared to Company B's,would be:
$$\begin{array} { l c c }
& \text { Gross profit } & \text { Inventory turnover } \
\text { a. } & \text { Lower } & \text { Lower } \
\text { b. } & \text { Higher } & \text { Higher } \
\text { c. } & \text { Higher } & \text { Lower } \
\text { d. } & \text { Lower } & \text { Higher }
\end{array}$$

Question

Company A is identical to Company B in every regard except that Company A uses FIFO and Company B uses LIFO.In an extended period of rising inventory costs,Company A's gross profit and inventory turnover,compared to Company B's,would be:
$$\begin{array} { l c c } 
& \text { Gross profit } & \text { Inventory turnover } \
\text { a. } & \text { Lower } & \text { Lower } \
\text { b. } & \text { Higher } & \text { Higher } \
\text { c. } & \text { Higher } & \text { Lower } \
\text { d. } & \text { Lower } & \text { Higher }
\end{array}$$

Quizplus · Accepted Answer

In a period of rising costs, FIFO results in lower cost of goods sold and higher ending inventory values, leading to higher gross profit. However, inventory turnover is lower because the ending inventory value is higher.

Company a Is Identical to Company B in Every Regard