Traditional costing methods — practice question

The cost of direct materials is going up. What would be the effect if a business used first-in-first-out (FIFO) rather than average cost (AVCO) to value inventory in this situation?

• ACost of sales increases, profit for the year decreases, closing inventory value increases
• BCost of sales increases, profit for the year decreases, closing inventory value decreases
• CCost of sales decreases, profit for the year increases, closing inventory value decreases
• DCost of sales decreases, profit for the year increases, closing inventory value increases