Assume that a steel manufacturer and a retailing firm have identical sales and income and that the costs of their purchased inputs of goods and services increase at the same rate. The steel company has inventory turnover (= cost of goods sold ^ average inventory)

of about four times per year, whereas the retailer has inventory turnover of about ten times per year. Which of the two firms is likely to benefit more by switching from FIFO to LIFO? Explain.

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