Assuming no beginning inventory, what can be said about the trend of inventory prices if cost of goods sold computed when inventory is valued using the FIFO method exceeds cost of goods sold when inventory is valued using the average cost method?
A) Prices decreased.
B) Prices remained unchanged.
C) Prices increased.
D) Price trend cannot be determined from information given.

Question

Quizplus · Accepted Answer

If the cost of goods sold under FIFO is higher than under the average cost method, it indicates that the older, cheaper inventory was sold first, suggesting that prices have decreased over time.

Assuming No Beginning Inventory, What Can Be Said About the Trend