Explain why a FIFO inventory system gives higher inventory valuation and lower cost of sales than average

Question:

Explain why a FIFO inventory system gives higher inventory valuation and lower cost of sales than average cost when prices are rising.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Financial Accounting A Critical Approach

ISBN: 978-1259066528

4th edition

Authors: John Friedlan

See More Books

Question Posted: Feb 26, 2015 11:13 AM

See More Questions

What should the Fed do when prices are rising at a 3.5 percent rate and unemployment is at 7 percent?
When inventory prices are rising, the LIFO method yields lower net income and lower values for ending inventory than does FIFO. The opposite is true when prices are declining. Why is this the case?
Why does a cost system developed for inventory valuation distort product cost information?
5.8 LAB: Structuring data using scale() and MinMaxScaler() The hmeq_small dataset contains information on 5960 home equity loans, including 7 features on the characteristics of the loan. Load the...
People living in Yap, an island group in the Pacific, at one time used as money large stone disks known as Rai. These disks can be up to 12 feet in diameter and were made of a stone that is not...
Suppose that in the next three months the market rate of interest falls to 4.6 percent. a. How much will Max be willing to pay for the mortgage? b. What will happen to the value of Treasury bond...
A company wants to produce 500 units over the next 3 months at a level rate. The months have 19, 20, and 21 working days, respectively. On the average, how much should the company produce each day to...
Anterra Company had a 22-foot fishing boat with an inboard motor that was purchased on April 9, 2006, for $77,000. The PPE Sub ledger shows the following information regarding the boat: On June 27,...
CHAPTER 5 / JOURNALIZING AND POSTING CHAPTER 5 -TEST 3 JOURNALIZING AND POSTING course and Section Date Score Action: For the month of April 2020: (1) journalite, (2) post, and (3) prepare w balance...
Suppose the average checkout tab at a large supermarket is $65.12, with a standard deviation of $21.45. Twenty-three percent of the time when a random sample of 45 customer tabs is examined, the...
Regardless of the cost formula being used (FIFO, average cost, specific identification), the sum of cost of sales plus ending inventory will be the same. Explain why.
Explain how costs flow through the following cost formulas: FIFO versus average cost versus specific identification.
(Error and Change in EstimateDepreciation) Joy Cunningham Co. purchased a machine on January 1, 2005, for $550,000. At that time it was estimated that the machine would have a 10-year life and no...
Choose a private label product that you have seen and discuss the possible reasons for why the particular retailer introduced this private label product and explain its features in detail.
Understanding your behaviors can help you become a better leader. As discussed in module 4 our beliefs & values can be summed up as our 'personality'. In this assignment you are to examine your own...
This week we learned about assessing competition. Watch the video the History of the Cola Wars and answer the following questions. Using the frameworks from the text and the online lesson, why is...
Prior to developing your training programs, you must analyze your organizational military needs, identify employee skills gaps based on performance, and have resources available to support training...
Describe specifically how your firm's culture lines up with the bullet points listed for that firm . For instance, if you believe your organization's strategy priority is creativity-driven , then...
Stone Corporation was started with the issue of 1,000 shares of $\$ 5$ par stock for cash on January 1 , 2011. The stock was issued at a market price of $\$ 18$ per share. During 2011, the...
(a) Find the equation of the tangent line to f(x) = x 3 at the point where x = 2. (b) Graph the tangent line and the function on the same axes. If the tangent line is used to estimate values of the...
Using the Vella and Verbeek (1998) study, download their data set which is posted on the Journal of Applied Econometrics web site and (a) Replicate their descriptive statistics given in Table I....
An accountant prepared the following post-closing trial balance: Prepare a corrected post-closing trial balance. Assume that all accounts have normal balances and that the amounts shown arecorrect....
Zeidman Security Services Co. offers security services to business clients. The trial balance for Zeidman Security Services Co. has been prepared on the end-of-period spreadsheet (work sheet) for the...
Zeidman Security Services Co. offers security services to business clients. Complete the following end-of-period spreadsheet (work sheet) for Zeidman Security ServicesCo. Zeidman Security Services...
When credit terms for a sale are 2/15, n/40, the customer saves by paying early. What percent (rounded) would this savings amount to on an annual basis
An industrial robot that is depreciated by the MACRS method has B = $60,000 and a 5-year depreciable life. If the depreciation charge in year 3 is $8,640, the salvage value that was used in the...
What determines a firm's beta? Should firm management make changes to its beta? Be sure to consider the implications for the firm's investors using CAPM.

Explain why a FIFO inventory system gives higher inventory valuation and lower cost of sales than average

Question:

Step by Step Answer:

Under FIFO when prices are rising the most recent more costly purchases are included ...View the full answer

Financial Accounting A Critical Approach

Students also viewed these Managerial Accounting questions