XYZ Inc. uses the average cost formula in a perpetual inventory system. Use the following
information for the month of June for questions . (Use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.)
-If XYZ Inc. was using the FIFO cost formula instead of average, gross profit from the June 8 sale would be
A)higher.
B)lower.
C)the same.
D)cannot be determined.

Question

XYZ Inc. uses the average cost formula in a perpetual inventory system. Use the following
information for the month of June for questions . (Use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.) 
-If XYZ Inc. was using the FIFO cost formula instead of average, gross profit from the June 8 sale would be
A)higher. 
B)lower. 
C)the same. 
D)cannot be determined.

Quizplus · Accepted Answer

FIFO (First-In, First-Out) assumes that the first items purchased are the first items sold. In this case, the cost of the items sold on June 8 would be higher than the average cost, resulting in a higher gross profit.

XYZ Inc Uses the Average Cost Formula in a Perpetual Inventory