Analyze the following scenario: The Hospital for Ordinary Surgery uses pharmaceu

Question

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 your analysis of which method is best for this scenario in a Word document not to exceed two pages

Explanation / Answer

inventory value at the end of the year, assuming FIFO = 1000*17 + 300*21 + 500*23 - 800*17 -200*17 -200*21 =$13600 inventory value at the end of the year, assuming LIFO = 1000*17 + 300*21 -300*21 -500*17 + 500*23 -400*23 =$10800 Advantages and disadvantages of FIFO Method The key advantages of FIFO method are mentioned below: The key advantage of FIFO method lies in its being simple and easy to understand and operate. It is a coherent method for it takes into consideration the normal procedure of utilizing the first received materials being used first. Materials are issued in the order of purchases, and thus the materials used first are utilized first. Under the FIFO Method, the materials are issued at the purchase value thus helping in the cost of work orders or a job being correctly determined as far as the materials

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