Two Companies Report the Same Cost of Goods Available for Sale

question 36

Multiple Choice

Two companies report the same cost of goods available for sale but each employs a different inventory costing method. If the price of goods has increased during the period then the company using

• A) LIFO will have the highest ending inventory.
• B) FIFO will have the highest cost of good sold.
• C) FIFO will have the highest ending inventory.
• D) LIFO will have the lowest cost of goods sold.

---

Definitions:

Profit-maximizing Output

The maximum profit attainment point for a company occurs when the marginal cost matches the marginal revenue, indicating the optimum production level.

Purely Competitive Firm

A firm operating in a market where there are many sellers and buyers, the products are homogenous, and there are no barriers to entry or exit, leading to market prices being determined by supply and demand.

Short Run

A period of time during which at least one of a firm's inputs is fixed, limiting its ability to adjust to changes in demand or production costs.