Which of the Following Statements Is Correct When Inventory Unit

question 27

Multiple Choice

Which of the following statements is correct when inventory unit costs are decreasing?

• A)Inventory turnover will be the greatest when the average cost inventory method is used.
• B)FIFO's gross profit will be the highest among the inventory costing methods.
• C)Inventory turnover will be the largest when the LIFO inventory method is used.
• D)Use of the LIFO method will result in higher cash flows due to a decreased cost of goods solD.LIFO has the lowest cost of goods sold, the highest gross profit and taxable income.LIFO will therefore result in a higher tax burden and lower cash flows.

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Definitions:

Resources

Various elements needed for the production of goods and services, often categorized into natural resources, human resources, and capital resources.

Unemployment Rate

The percentage of the labor force that is jobless and actively looking for employment.

Worker Productivity

The amount of goods and services produced per hour worked by an employee.

Production Possibility Frontier

A curve depicting all maximum output possibilities for two goods, given a set of inputs and production technology, illustrating the concept of opportunity cost.