When Prices Are Rising, Which Method of Inventory, If Any

question 40

Multiple Choice

When prices are rising, which method of inventory, if any, will result in the lowest relative net cash outflow (including the effects of taxes, if any) ?

• A)weighted average.
• B)FIFO.
• C)LIFO.
• D)None of these; inventory methods cannot affect cash flows.

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Definitions:

Minimize Profits

The strategy or outcome where a business seeks to make the lowest possible profit, often for tax, regulatory, or strategic reasons.

Maximize Profits

The process of adjusting operations and resources to achieve the highest possible profit.

Break-even

The point at which total cost and total revenue are equal, meaning no net loss or gain is incurred by the business.

Profit Per Unit

The amount of money gained from selling one unit of a product, calculated by subtracting the cost per unit from the selling price.