Question

Company A is identical to Company B in every regard except that Company A uses FIFO and Company B uses LIFO. In an extended period of rising inventory costs, Company A's gross profit and inventory turnover ratio, compared to Company B's, would be:Col1 a b c dCol2 Gross Profit lower higher higher lower Col3 Inventory Turnover lower higher lower higherA. Option A B. Option C C. Option D D. Option B

Answer 1

Answer:

higher, lower

good luck

Answer 2

Answer:

Company A's gross profit is higher and inventory turnover is lower.

Explanation:

In an inflationary environment, FIFO has the lowest COGS and highest ending inventory. Since company A uses FIFO, it has the lowest COGS thus the higher gross profit.

Inventory Turnover Ratio = COGS / Average Inventory, so it is lower.