Accounting Multiple Choice Question – 3 February 2022

Inventory cost prices are rising for a business. The company uses AVCO rather than FIFO to value its inventory.

What is the effect on inventory valuation and profit of using AVCO rather than FIFO?

Select ONE answer:

1. inventory valuation – higher / profit – higher
2. inventory valuation – higher / profit – lower
3. inventory valuation – lower / profit – higher
4. inventory valuation – lower / profit – lower

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct

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