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Which one of the following inventory cost flow assumptions will result in a higher inventory turnover ratio in an inflationary economy ?

A. Weighted average.

B. FIFO.

C. LIFO.

D. Specific identification.

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Question added by Deleted user
Date Posted: 2015/08/30
Alhassan Shaibu
by Alhassan Shaibu , Data Entry Clerk (Contract) , Pilgrim Affairs Office of Ghana (Ghana Hajj Board)

C. Last In First Out (LIFO) Method

Sadiq ul Islam
by Sadiq ul Islam , Financial Controller , BinDawood Holding Company (BDH)

C) LIFO will be correct answer.

I believe by using LIFO, Inventory valuations will be lesser than other inventory valuation methods in inflationary economy (e.g. FIFO, weighted/Moving average or specific identification) and COGS will be higher. This situation will consequently impact in higher inventory Turnover by using formula of COGS/ Inventory.

 

Hashim Nadir
by Hashim Nadir , Chief Accountant , Burhani Computers Trading llc

Weighted average will help in high turnover ratio as it will show average profit which increase as per the cost of production variation

Probably i prefer FIFO,SINCE ITS MORE EFFICIENCY AND EASY TO OPERATE.

 

Sohail Lone
by Sohail Lone , Assistant Manager Audit , Deloitte - United Arab Emirates

B) FIFO: It will  produce lower CGS and higher Net income

Mohammad Rashedul Haque Rashed
by Mohammad Rashedul Haque Rashed , Director Sales , Clarke Energy Bangladesh Ltd

Answer............D. Specific identification

AYOOB BASHA HAWALDAR
by AYOOB BASHA HAWALDAR , Accountant - Cost , AL Hasawi Industrials Group W.L.L

C.  LIFO - for manufacture Co.

D. Specific identification -for Trading

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