When a Company Has Inventory Which Is Subject to Gradually

question 45

Multiple Choice

When a company has inventory which is subject to gradually increasing prices,the use of the LIFO method of valuing inventory will result in the:

• A)highest amount of assets and the lowest amount of net income.
• B)highest amount of assets and the highest amount of net income.
• C)lowest amount of assets and the highest amount of net income.
• D)lowest amount of assets and the lowest amount of net income.

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Definitions:

Economic Costs

The total cost of production, including both explicit costs like wages and materials and implicit costs such as opportunity costs.

Accounting Profit

The total revenue of a business minus the explicit costs associated with that revenue, calculated using generally accepted accounting principles (GAAP).

Long Run

A period of time in economics during which all factors of production and costs are variable, allowing for full adjustment to changes.

Short Run

In economics, a period during which at least one of a firm's inputs is fixed and cannot be changed.