Answer: inventory turnover ratio than under the FIFO method.

## 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: | Metric | LIFO (Rising Costs) | FIFO (Rising Costs) | |--------|-------------------|-------------------| | COGS | Higher | Lower | | Ending Inventory | Lower | Higher | | Gross Profit | Lower | Higher | | Inventory Turnover | **Higher** | Lower | Therefore, the correct answer is **C** - LIFO results in a higher inventory turnover ratio than FIFO in a rising cost environment.

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