Question

which inventory methods can produce more net income.

which inventory methods can produce more net income.

Homework Answers

Answer #1
  1. There is no as such hard and fast rule that a particular type of inventory valuation may produce more net income. It totally depends upon the inflation that is price of the raw materials.
  2. In case of inflation, when prices of the raw material are increasing, FIFO method will give more profit than other other two methods.
  3. In case of deflation, when prices of raw material are falling, LIFO method will give more profit than other two methods of valuing inventory.
  4. If there is no change in the prices of the inventory than all 3 methods would give same level of profit.
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
If you were attempting to maximize your net income, which inventory cost flow assumption would you...
If you were attempting to maximize your net income, which inventory cost flow assumption would you choose? Why? What conditions must exist for this method to produce the highest net income? When perpetual inventory records are kept, the results under the FIFO and LIFO methods are the same as they would be in a periodic inventory system.” Do you agree? Explain.
1. In a period of rising prices, which of the following inventory methods generally results in...
1. In a period of rising prices, which of the following inventory methods generally results in the lowest net income figure? A. Average cost method B. FIFO method C. LIFO method D. Need more information to answer 2. In a period of rising prices, which of the following inventory methods generally results in the lowest cost of goods sold figure? A. LIFO method B. FIFO method C. Need more information to answer D. Average cost method 3. In a period...
Explain the effects of inventory valuation methods on the cost of ending inventory, income, and income...
Explain the effects of inventory valuation methods on the cost of ending inventory, income, and income taxes.
You can buy a machine at $ 100,000 that will produce a net income, after operating...
You can buy a machine at $ 100,000 that will produce a net income, after operating expenses, of $ 20,000 the first year, increasing this net income by $ 1,000 per year. If you plan to have the machine for five years, what should the market value (of resale) be at the end of 5 years for the investment to be justified? You must obtain a return of 15% on your investment. Draw flow diagram
1. A service company's net income can be expected to increase in which of the following...
1. A service company's net income can be expected to increase in which of the following scenarios involving an overall shortening of the operating cycle?       a. inventory cost savings are generated from decreasing the inventory turnover rate b. gross profit rate improvements due to less average number of days to sell inventory c. net sales increases due to less average number of days to collect accounts receivable d. none of the above 2. The cost of delivering merchandise to the...
A manufacturing company using full-absorption costing can increase net income by which of the following. A)...
A manufacturing company using full-absorption costing can increase net income by which of the following. A) Increasing production and increasing ending inventory at the end of the year. B) Decreasing the inventory C) Writing ending inventory down to its fair value. D) All of the above.
The management of Svetlana Corp. is considering the effects of inventory-costing methods on its financial statements...
The management of Svetlana Corp. is considering the effects of inventory-costing methods on its financial statements and its income tax expense. Assuming that the price the company pays for inventory is increasing, which method will: a. Provide the highest net income, LIFO or FIFO? b. Provide the highest ending inventory, LIFO or FIFO? c. Result in the lowest income tax expense, LIFO or FIFO?
The management of Svetlana Corp. is considering the effects of inventory-costing methods on its financial statements...
The management of Svetlana Corp. is considering the effects of inventory-costing methods on its financial statements and its income tax expense. Assuming that the price the company pays for inventory is increasing, which method will: a. Provide the highest net income, LIFO or FIFO? b. Provide the highest ending inventory, LIFO or FIFO? c. Result in the lowest income tax expense, LIFO or FIFO?
3.If costs are falling, which of the following inventory costing methods will lead to the highest...
3.If costs are falling, which of the following inventory costing methods will lead to the highest Cost of Goods Sold on the Income Statement? A. LIFO B. Weighted Average C. FIFO
the management of Otto Corp. is considering the effects of various inventory costing methods on its...
the management of Otto Corp. is considering the effects of various inventory costing methods on its financial statements and its income tax expense. Assuming that the price the company pays for inventory is increasing. 1. Which method will result in the lowest income tax expense? select a method FIFOAverage Cost MethodLIFO method will result in the lowest income tax expense. 2. Which method will provide the highest net income? select a method LIFOFIFOAverage Cost Method method will provide the highest...