If a company had two units that cost $1 each in its beginning inventory and purchased two more units for $2 each, what would be the gross profit reported on the income statement under each of the following assumptions if three units were sold for $3 each?

a. FIFO

b. LIFO

c. Average cost 6. In a period of rising inventory costs, which cost-flow assumption would produce the highest net income? Why?

AppendixLO1