Question
Husky, Inc. has the following financial statement information for the years ending December 31, 2018 and 2017. (Dollar amounts are in millions of dollars). 2018
Husky, Inc. has the following financial statement information for the years ending December 31, 2018 and 2017. (Dollar amounts are in millions of dollars).
2018 2017 2018 2017
Cash $ 1,880 $ 2,087 Sales $ 67,420 $ 63,335
Accounts receivable, net 2,450 2,496 Cost of goods sold 48,250 46,435
Inventories 7,378 6,789 Gross profit $ 19,170 $ 16,900
Other current assets 214 677
Total current assets $ 11,922 $12,049
Accounts payable $ 4,585 $ 4,308
Other current liabilities 2,848 2,461
Total current liabilities $ 7,433 $ 6,769
The financial statement also includes the following note pertaining to inventories.
Inventories are valued on a lower of last-in,first-out (LIFO) cost or market basis. At December 31, 2018 and 2017, inventories would have been greater by $1,379 million and $1,239 million, respectively, if they had been valued on a lower of first-in, first-out (FIFO) cost or market basis. Inventory includes product costs, inbound freight, warehousing costs, and vendor allowances.
How would the company's 2018 gross profit margin change if the company had used FIFO rather than LIFO?
a. | The company's gross profit margin would increase by 0.2% points. | |
b. | The company's gross profit margin would increase by 0.4% points. | |
c. | The company's gross profit margin would decrease by 0.4% points. | |
d. | The company's gross profit margin would decrease by 0.2% points. |
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