Explanation

In an environment of rising inventory unit costs with constant inventory quantities:

Understanding LIFO vs FIFO:

• LIFO (Last-In, First-Out): Assumes the most recently purchased (and therefore more expensive) inventory is sold first
• FIFO (First-In, First-Out): Assumes the oldest (and therefore less expensive) inventory is sold first

Analysis of each option:

A. Ending inventory than under the FIFO method - INCORRECT

• Under LIFO with rising costs, ending inventory consists of older, lower-cost items
• Under FIFO with rising costs, ending inventory consists of newer, higher-cost items
• Therefore, LIFO ending inventory is LOWER than FIFO ending inventory

B. Gross profit margin than under the FIFO method - INCORRECT

• Under LIFO with rising costs, COGS includes newer, higher-cost items → higher COGS
• Higher COGS means lower gross profit
• Therefore, LIFO gross profit margin is LOWER than FIFO gross profit margin

C. Inventory turnover ratio than under the FIFO method - CORRECT

• Inventory turnover ratio = COGS / Average Inventory
• Under LIFO with rising costs:
  • COGS is higher (includes newer, higher-cost items)
  • Average inventory is lower (older, lower-cost items)
• Higher numerator (COGS) and lower denominator (Average Inventory) → higher inventory turnover ratio
• Under FIFO with rising costs:
  • COGS is lower (older, lower-cost items)
  • Average inventory is higher (newer, higher-cost items)
  • Lower numerator and higher denominator → lower inventory turnover ratio

Key Relationships:

Therefore, the correct answer is C - LIFO results in a higher inventory turnover ratio than FIFO in a rising cost environment.