In a Period of Declining Prices, Which of the Following

question 53

Multiple Choice

In a period of declining prices, which of the following inventory cost formulas generally results in the lowest inventory figure on the statement of financial position?

• A)average cost
• B)FIFO
• C)The figure would be the same under both FIFO and average cost.
• D)need more information to answer

---

Definitions:

Margin of Safety Percentage

The ratio that indicates how much sales can decline before a business reaches its break-even point.

Total Sales

The aggregate revenue generated from all goods and services sold by a company within a specific period.

Contribution Margin

The amount by which sales revenue exceeds variable costs of production, used to cover fixed costs and generate profit.

Net Income

The total earnings of a company after subtracting all expenses, including taxes and operating costs, indicative of its profitability.