In a Period of Inflation (Prices Are Rising), Which Inventory

question 30

Multiple Choice

In a period of inflation (prices are rising) , which inventory cost formula will result in higher net income?

• A) FIFO
• B) average cost
• C) Cost of goods sold for the period will be the same under both formulas.
• D) There would be no effect on net income.

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Definitions:

Bacteria

Single-celled microorganisms that can be found in a wide range of environments; some cause disease while others are beneficial.

Siliceous Shells

Shells or skeletons of some aquatic organisms, made of silica and found in diatoms and certain sponges.

Diatoms

A major group of algae, specifically microalgae, known for their unique silica-based cell walls, which exhibit intricate and beautiful designs.

Unicellular

Composed of a single cell, characteristic of organisms that perform all life processes within a single cellular structure.