When Prices Are Rising, Valuing Ending Inventory Using the FIFO

question 48

Multiple Choice

When prices are rising, valuing ending inventory using the FIFO method rather than weighted average cost gives:

• A) inventory a higher value but lowers profit.
• B) inventory a lower value and also lowers profit.
• C) both inventory and profit a higher value.
• D) inventory a lower value and profit a higher value.

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Definitions:

Perfect Substitutes

Two or more goods that can be used in place of one another with no loss of utility for the consumer, resulting in constant marginal rates of substitution.

Perfect Substitutes

Goods or services that can be used in exactly the same way and are interchangeable by consumers.

Coupons

Vouchers or codes offering a discount on the purchase price of goods or services.

Utility Function

A mathematical representation of how a set of choices maps to utility levels, indicating preferences over different bundles of goods or outcomes.