The records at the end of January 2012 for Captain Company showed the following
ID: 2519694 • Letter: T
Question
The records at the end of January 2012 for Captain Company showed the following for a merchandise: Inventory, December 31, 2011, at FIFO: 16 Units@ $16 $256 Inventory, December 31, 2011, at LIFO: 16 Units@ $12 $192 Purchase, January 9, 2012 Purchase, January 20, 2012 Sale, January 21, 2012 (at $38 per unit) Sale, January 27, 2012 (at $39 per unit) 27 54 36 27 $14 $378 19 1,026 Required 1. Compute the inventory turnover ratio under the FIFO and LIFO inventory costing methods. (Do not round intermediate calculations and round your final answers to 2 decimal places.) FIFO Inventory turnover ratio LIFO Inventory turnover ratio 2.25 2. Which costing method is the more accurate indicator of the efficiency of inventory management? FIFO OLIFO Hints References eBook & Resources Hint#1Explanation / Answer
Solution:
1) FIFO: 2.25
LIFO: 3.62
Working:
inventory turnover ratio = COGS / Average inventory
FIFO:
Average inventory: (256 + 646) / 2 =451
Inventory turnover ratio = 1014 / 451 = 2.25
FIFO
Sales: 36 units
16 units * 16 = 256
20 units * 14 = 280
536
Sales: 27 units
7 units *14 = 98
20 units * 19 = 380
478
Total
1,014
Ending inventory: 34 units
34 units *19 = 646
646
?
LIFO:
Average inventory: (192 + 444) / 2 =318
Inventory turnover ratio = 1,152 / 318 = 3.62
?
LIFO
Sales: 36 units
36 units * 19 = 684
684
Sales: 27 units
18 units *19 =342
9 units * 14 = 126
468
Total
1,152
Ending inventory: 34 units
18 units *14 = 252
16 units * 12 = 192
444
2) FIFO provide accurate indicator of managment efficiency
FIFO
Sales: 36 units
16 units * 16 = 256
20 units * 14 = 280
536
Sales: 27 units
7 units *14 = 98
20 units * 19 = 380
478
Total
1,014
Ending inventory: 34 units
34 units *19 = 646
646
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.