Choose the Statement That Best Describes the Effects of the LIFO

question 57

Multiple Choice

Choose the statement that best describes the effects of the LIFO inventory valuation method compared with FIFO or average cost.

• A) During periods of rising prices LIFO gives the highest gross profit and the lowest closing inventory value.
• B) During periods of falling prices LIFO gives the highest gross profit and the lowest closing inventory value.
• C) During periods of rising prices LIFO gives the lowest gross profit and the lowest closing inventory value.
• D) None of the above.

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Definitions:

Beginning Inventory

The worth of merchandise ready to be sold at the beginning of a financial period.

Production Budget

An estimate of the total cost of production, including direct labor, materials, and overhead, for a specific period.

Beginning Inventory

The worth of merchandise ready for purchase at the beginning of a financial cycle.

Budgeted Sales

The projected amount of sales, in units or dollars, that a company plans to achieve in a specific period.