Which of the Following Will Occur When Inventory Costs Are

question 17

Multiple Choice

Which of the following will occur when inventory costs are decreasing?

• A) LIFO will result in lower net income and lower ending inventory than will FIFO.
• B) FIFO will result in lower net income and lower ending inventory than will LIFO.
• C) LIFO will result in a lower net income,but a higher ending inventory,than will FIFO.
• D) FIFO will result in a lower net income,but a higher ending inventory,than will LIFO.

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Definitions:

Investment Turnover

A measure of a company's efficacy in using its assets to generate revenue, calculated by dividing sales by the average investment.

Profit Margin

is the percentage of revenue that remains as profit after all expenses are subtracted from sales.

Return On Investment

A measure of the profitability and efficiency of an investment, calculated by dividing the gain from an investment by the cost of the investment.

Invested Assets

Assets that are purchased or acquired for the purpose of generating income or profit.