Question: Study Appendix 16A Suppose that the evaluation of the purchasing
Study Appendix 16A. Suppose that the evaluation of the purchasing officer for a refinery is based on the gross margin on the oil products produced and sold during the year. During the year, the price of a barrel of oil has increased from $50 to $70. All the inventory of oil at the beginning of the year is valued at $50 or less. On the last day of the year, the purchasing agent is contemplating the purchase of additional oil at $70 per barrel. Is the agent more likely to purchase additional oil if the company uses the FIFO or the LIFO method for its inventories? Explain.
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