Use the following information for the month of July for questions
ABC Inc.uses the FIFO cost method in a perpetual inventory system.
-If ABC Inc.used the average cost method 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 method in a perpetual inventory system. 
-If ABC Inc.used the average cost method 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

The average cost method would result in a higher cost of goods sold and a lower gross profit compared to FIFO, as it takes into account the average cost of all units in inventory, regardless of when they were purchased. Therefore, the gross profit from the July 8 sale would be lower if the average cost method was used.

Use the Following Information for the Month of July for Questions