During a period of rising prices (inflation), how will the valuation of closing inventory using the Weighted Average Cost (AVCO) method compare to the FIFO method?

Correct answer: A) AVCO will result in a lower closing inventory value than FIFO.

Explanation

Under FIFO, the newest (and highest) costs remain in closing inventory. Under AVCO, costs are averaged, blending older (lower) costs with newer (higher) costs. Thus, AVCO closing inventory is lower than FIFO.