Sandra Company Had Two Hundred Units of Inventory on Hand

Multiple Choice

Sandra Company had two hundred units of inventory on hand at the end of the year. These were recorded at a cost of $12 each using the last-in, first-out (LIFO) method. The current replacement cost is $10 per unit. The selling price charged by Sandra Company for each finished product is $15. As a result of recording the adjusting entry as per the lower-of-cost-or-market rule, the gross profit will:

A) increase by $2,000.
B) decrease by $2,000.
C) increase by $400.
D) decrease by $400.