A Company's Operating Income Recently Increased by 30% While Its

question 25

Multiple Choice

A company's operating income recently increased by 30% while its inventory increased in a given year. Which of the following accounting methods would produce the most favorable income results?

• A) Full costing.
• B) Direct costing.
• C) Variable costing.
• D) Standard direct costing.

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Definitions:

LIFO Method

An inventory valuation method that assumes the last items placed in inventory are the first sold during an accounting period; LIFO stands for Last-In, First-Out.

Ending Inventory

The value of goods available for sale at the end of an accounting period, after accounting for sales and additions during the period.

Toasters

Kitchen appliances designed for toasting bread.

LIFO Method

LIFO, or Last-In, First-Out, is an accounting method used to value inventory, where the most recently produced or purchased items are recorded as sold first.