Question

26.1.2 Exam: Semester 1 Exam

Question 10 of 40
A business wants to maximize its gross profit in an economy with declining
costs. It should choose the method.
A. FIFO
B. LIFO
C. gross profit
D. weighted average
SUBMIT

Answer 1

The business should choose the LIFO method to maximize gross profit in an economy with declining costs.

Step-by-step explanation:

In order to maximize its gross profit in an economy with declining costs, a business should choose the LIFO (Last-In, First-Out) method. LIFO assumes that the most recent inventory purchased is sold first. This is beneficial in a declining cost environment because it results in higher cost of goods sold (COGS) and lower ending inventory value, which in turn increases gross profit.

Learn more about Maximizing gross profit in a declining cost economy