The Two Inventory Cost Formulas Will Result in the Following $\quad$

question 1

Multiple Choice

The two inventory cost formulas will result in the following comparative effects on profit during a period when prices are rising:
$\quad$ FIFO $\quad$$\quad$ Average

• A) Higher\(\quad \)\(\quad \) no effect
• B) Higher\(\quad \)\(\quad \) lower
• C) Lower\(\quad \)\(\quad \) higher
• D) No effect \(\quad \)No effect

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Definitions:

ATC

Average Total Cost, which is the total cost of production divided by the number of goods produced.

Variable Costs

Costs that change in proportion to the level of activity or volume of production in a business.

Fixed Costs

Fixed costs refer to expenses that do not change with the level of production or sales, such as rent, salaries, and insurance premiums.

Total Costs

The aggregate amount of money spent on producing goods or services, covering both stable and changeable costs.