Hey everyone! Can someone help with this? A little lost on the explanation when it says that operating margin would be higher because of the older and lower costs being included. Wouldnt Inventory costs be higher as well?
In an inflationary environment, a LIFO liquidation will most likely result in an increase in:
A)inventory.
B)accounts payable.
C)operating profit margin.
Explanation
In a LIFO liquidation, older and lower costs are included in cost of sales. Thus, cost of sales per unit decreases and profit margins increase. (LOS 25.e)