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Company C is identical to Company D in every respect except that Company C uses LIFO and Company D uses average costs. In an extended period of rising inventory costs, Company C's gross profit and inventory turnover ratio, compared to Company D's, would be:________
Gross Profit Inventory Turnover
a. higher higher
b. higher lower
c. lower lower
d. lower higher

Respuesta :

Zviko

Answer:

Cs Gross Profit - Inventory Turnover would be  c. lower lower

Explanation:

LIFO Inventory System Sells the most Recent Inventory Acquired first followed by the older inventory.

This has two effects:

(1) Sales are priced on the recent prices (therefore higher than those of weighted average cost prices). Demand will fall for these high prices resulting in lower turnover.

(2) Inventory are carried at old prices thus profit will be lower compared to those of weighted average cost.

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