During 2018, WW Inc

question 140

Multiple Choice

During 2018, WW Inc. reduced its LIFO eligible inventory quantities due to a problem with its major supplier. The effect of this liquidation was to increase its cost of goods sold by approximately $50 million. WW has a 40% income tax rate. If WW had not experienced these supplier problems and the resulting liquidation:

• A) Its 2018 net income would have been $30 million lower because inventory purchase prices were rising.
• B) Its 2018 net income would have been $30 million lower because inventory purchase prices were declining.
• C) Its 2018 net income would have been $30 million higher because inventory purchase prices were rising.
• D) Its 2018 net income would have been $30 million higher because inventory purchase prices were declining.

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Definitions:

Total Costs

The overall expenditure associated with producing goods or services, embracing both fixed and variable costs.

Flight Capacity

The maximum number of passengers or quantity of cargo that an aircraft can carry.

Price Elasticity

The degree to which the demand for a product is sensitive to price changes, indicating how the quantity demanded fluctuates with price variation.

Cournot Duopolists

Firms in a duopoly market structure where each firm chooses its quantity to produce based on the quantity chosen by its competitor, following the Cournot assumption.