   # When prices are rising (inflation), which costing method would produce the highest value for gross margin? Choose between first-in, first-out (FIFO); last-in, first-out (LIFO); and weighted average (AVG). Evansville Company had the following transactions for the month. Calculate the gross margin for each of the following cost allocation methods, assuming A62 sold just one unit of these goods for \$10,000. Provide your calculations. A. first-in, first-out (FIFO) B. last-in, first-out (LIFO) C. weighted average (AVG) FindFindarrow_forward

### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

#### Solutions

Chapter
Section FindFindarrow_forward

### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 10, Problem 1PA
Textbook Problem
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## When prices are rising (inflation), which costing method would produce the highest value for gross margin? Choose between first-in, first-out (FIFO); last-in, first-out (LIFO); and weighted average (AVG). Evansville Company had the following transactions for the month. Calculate the gross margin for each of the following cost allocation methods, assuming A62 sold just one unit of these goods for \$10,000. Provide your calculations.A. first-in, first-out (FIFO)B. last-in, first-out (LIFO)C. weighted average (AVG)

To determine

Concept introduction:

FIFO (First in first out): In FIFO Method Company issues first that material which is purchased earliest. This method provides highest gross margin in case of inflation.

Requirement-1:

To calculate:

Gross margin under FIFO method.

### Explanation of Solution

Gross margin as per FIFO= Sale value − Cost of goods so...

To determine

Concept introduction:

LIFO (Last in first out): In LIFO Method, Company issues first that material which comes in last in inventory. This method provides least gross margin in case of inflation.

Requirement-2:

To calculate:

Gross margin under LIFO method.

To determine

Concept introduction:

Weighted average method: In this method we issue material on random basis, so every type of goods has equal probability.

Requirement-3:

To calculate:

Gross margin under Weighted Average method.

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