When Inventory Prices Are Increasing, the FIFO Costing Method Will

question 66

Multiple Choice

When inventory prices are increasing, the FIFO costing method will generally yield a cost of goods sold that is:

• A) higher than cost of goods sold under the LIFO method.
• B) lower than cost of goods sold under the LIFO method.
• C) equal to the gross profit under the LIFO method.
• D) equal to cost of goods sold under the LIFO method.

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Definitions:

Optimum Performance

The most efficient and effective level of functioning of a system or device.

Menu Costs

The costs incurred by firms in order to change their prices, including costs related to printing new menus, re-tagging items, or advertising new prices.

Inflation-induced Tax Distortions

Discrepancies in the effective tax burden caused by inflation, which can lead to distorted investment and consumption decisions.

Shoeleather Costs

Shoeleather costs are the metaphorical costs of inflation, referring to the time and effort spent trying to avoid holding onto cash as it loses value.