Suppose a company bases its evaluation of the purchasing officer for a refinery on the gross margin on the oil products produced and sold during the year. During the year, the price of a barrel of oil increased from $80 to $90. The value of the inventory of oil at the beginning of the year is $80 or less per barrel. On the last day of the year, the purchasing agent is contemplating the purchase of additional oil at $90 per barrel. Is the agent more likely to purchase additional oil if the company uses the FIFO or LIFO method for its inventories? Explain.
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