CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

In a period of declining prices, which of the following statements would be true?

A. LIFO would produce higher gross profit margin percentages than would average costs.
B. FIFO would produce higher gross profit margin percentages than would LIFO.
C. Average costs would produce higher gross profit margin percentages than would LIFO.
D. FIFO would produce higher gross profit margin percentages than would average costs.
Correct Answer: A

If prices are declining, LIFO would provide lower cost of goods sold, since lower costs would be allocated to the items sold.

User Contributed Comments 1

User Comment
teddajr During Price decline, COGS-> LIFO < AvgCost < FIFO
But, In Price Increase, COGS-> FIFO < AvgCost < LIFO
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