CPA Firm Environment and Concepts (BEC) Aid » Operations Management: Performance Management » LIFO, FIFO, & Weighted Average Inventory Methods

Which inventory costing method would a company that wishes to maximize earnings in a period of increasing prices use?


In a period of rising prices, the oldest inventory, or the inventory offered in FIFO would certainly be the leastern expensive. Therefore, the profit margin would be the largest here.

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Assuming constant inventory amounts, which of the complying with inventory costing methods will develop a reduced inventory turnover proportion in an inflationary economy?


In a duration of climbing prices, the earliest inventory, or the inventory supplied in FIFO would be the leastern expensive. Thus, the profit margin would be the biggest here.

During periods of inflation, a perpetual inventory system would bring about the exact same dollar amount of finishing inventory as a regular inventory device under which of the adhering to inventory valuation methods?


Only under FIFO would certainly the usage of a perpetual device result in the same dollar amount of finishing inventory as a periodic mechanism.


Variable costing typically produces the lowest inventory values considering that only variable expenses are capitalized.

Which of the complying with prices is deducted from earnings of a production firm in order to recognize gross margin, but not deducted from revenues to determine contribution margin? 


Under the absorption strategy, all fixed and also variable production overhead is part of cost of items offered to recognize an entity"s gross margin.


Using the FIFO method accounts for work-related to be finished and also using the weighted average strategy blends the devices.

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