Question

A growing firm is contemplating switching from a FIFO to a LIFO cost flow assumption for
inventories and cost of goods sold because it has recently experienced increasing manufacturing
costs
for its products and anticipates a prolonged period of increasing quantities and
manufacturing costs in the future. The firm wishes to know which of the following statements
about the effect of the switch to LIFO is correct, relative to remaining on FIFO (ignore income
tax effects):

a. the current ratio will be higher
b. the inventory turnover will be lower
c. the cost of goods sold to sales percentage will be lower
d. none of the above

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Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN: 9781337115773
Author: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher: Cengage Learning
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