Question 1 ALL O Minutes, 35 2 pts 1. In a period of rising prices, the FIFO inventory cost flow assumption would maximize net income and thus management's year-end bonus. Assume a gadget is acquired on January 1 for $10 and one on July 1 for $16. On December 1, one gadget is sold for $20. Gross profit calculations under each cost flow assumption would be: FIFO Wtd. avg $20 Sales Cost of Goods Sold $20 10 Gross Profit $10 $ ($10+ +16)/2 $12 lf prices were falling the choice would be the opposite. The weighted avenue inventory cost flow assumption vields the higher net income