FIFO and LIFO Analyze the following scenario: The Hospital for Ordinary Surgery

Question

FIFO and LIFO

Analyze the following scenario: The Hospital for Ordinary Surgery uses pharmaceuticals for its patients. It started the year on January 1, with an inventory of 1,000 doses of an antibiotic drug that cost $17 per dose. On January 2, it purchased another 300 does for $21 each. From January 3 through June 30 it used 800 doses. On July 1, it bought 500 more doses at $23 each. From July 2 through the end of the year it used 400 doses. What is the inventory value at the end of the year, assuming FIFO? What is the value assuming LIFO? Clearly label the calculations of the inventory amounts using Excel. Use formulas to calculate the FIFO and LIFO inventories and format the cells to insert a comma if there is more than three numbers and round to the nearest whole number.

Explain the advantages and disadvantages of FIFO and LIFO inventory methods and evaluate the best inventory method is best for this scenario.

Submit a two to three page Word document (not including the title and reference pages) and your Excel worksheet. Your paper should be formatted according to APA style as outlined in the approved APA style guide, and you must cite at least two scholarly sources in addition to the textbook.

Explanation / Answer

Ans

Workings

Ans 2

Details FIFO LIFO Inventory Valuation 13600.00 10800.00

Workings

FIFO Date Opening Purchase Issue Closing Balance Qty Cost per Unit Cost Qty Cost per Unit Cost Qty Cost per Unit Cost Qty Cost per Unit Cost 01-Jan 1,000.00 17.00         17,000.00 1,000.00         17.00 17,000.00 02-Jan       300.00       21.00     6,300.00 1,000.00         17.00 17,000.00       300.00         21.00     6,300.00 "03-Jan-30-Jun       800.00         17.00 13,600.00       200.00         17.00     3,400.00       300.00         21.00     6,300.00 01-Jul       500.00       23.00 11,500.00       200.00         17.00     3,400.00       300.00         21.00     6,300.00       500.00         23.00 11,500.00 02-Jul-31 Dec       200.00         17.00     3,400.00       100.00         21.00     2,100.00       200.00         21.00     4,200.00       500.00         23.00 11,500.00 31-Dec       100.00         21.00     2,100.00       500.00         23.00 11,500.00 LIFO Date Opening Purchase Issue Closing Balance Qty Cost per Unit Cost Qty Cost per Unit Cost Qty Cost per Unit Cost Qty Cost per Unit Cost 01-Jan 1,000.00 17.00         17,000.00 1,000.00         17.00 17,000.00 02-Jan       300.00       21.00     6,300.00 1,000.00         17.00 17,000.00       300.00         21.00     6,300.00 "03-Jan-30-Jun       500.00         17.00     8,500.00       300.00         21.00     6,300.00       500.00         17.00     8,500.00 01-Jul       500.00       23.00 11,500.00       500.00         17.00     8,500.00       500.00         23.00 11,500.00 02-Jul-31 Dec       400.00         23.00     9,200.00       100.00         23.00     2,300.00       500.00         17.00     8,500.00 31-Dec       500.00         17.00     8,500.00       100.00         23.00     2,300.00

Ans 2

FIFO LIFO Better represent the Balance sheet Better represent the income statement and matchig concept. During inflation it ovestates the profit During inflation, it understates the profit Increase the tax payout incase of inflation Decrease the tax payout incase of inflation

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