Final answer:
In a rising price scenario, both FIFO and AVCO methods affect the calculation of profit and inventory value. FIFO results in higher profits and higher inventory value, while AVCO results in lower profits and lower inventory value.
Step-by-step explanation:
In a rising price scenario, both FIFO (First-In-First-Out) and AVCO (Average Cost) methods affect the calculation of profit and inventory value.
FIFO assumes that the oldest inventory is sold first, so when prices rise, the cost of goods sold (COGS) and income will be lower, resulting in higher profits. The value of the remaining inventory will also be higher, as it is based on the cost of the most recent purchases.
On the other hand, AVCO calculates the average cost of all inventory units. When prices rise, the average cost increases, resulting in higher COGS and lower profits. The value of the remaining inventory will also be lower, as it is based on the higher average cost.