Use the following information for the month of July for questions
ABC Inc.uses the FIFO cost formula in a perpetual inventory system.

-If ABC Inc.used the average cost formula instead of FIFO, gross profit from the July 8 sale would be
A)higher.
B)lower.
C)the same.
D)cannot be determined.

Question

Use the following information for the month of July for questions 
ABC Inc.uses the FIFO cost formula in a perpetual inventory system.
 
-If ABC Inc.used the average cost formula instead of FIFO, gross profit from the July 8 sale would be
A)higher. 
B)lower. 
C)the same. 
D)cannot be determined.

Quizplus · Accepted Answer

Using the average cost method typically results in a lower gross profit compared to FIFO when prices are rising, as it averages out the cost of goods sold, leading to a higher cost of goods sold and thus a lower gross profit.

Use the Following Information for the Month of July for Questions