Which of the Following Statements Is Correct When Inventory Unit

question 27

Multiple Choice

Which of the following statements is correct when inventory unit costs are decreasing?

• A)Inventory turnover will be the greatest when the average cost inventory method is used.
• B)FIFO's gross profit will be the highest among the inventory costing methods.
• C)Inventory turnover will be the largest when the LIFO inventory method is used.
• D)Use of the LIFO method will result in higher cash flows due to a decreased cost of goods solD.LIFO has the lowest cost of goods sold, the highest gross profit and taxable income.LIFO will therefore result in a higher tax burden and lower cash flows.

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