Mgmt_200_Spring_2008_solutions_2-29-08(2,29)

Mgmt_200_Spring_2008_solutions_2-29-08(2,29) - Units(19 25...

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Management 200 – Introductory Financial Accounting– Spring 2008 Krannert School of Management - Purdue University Solutions to class assignment for February 29, 2008 E7–14. CASE A – FIFO: Goods available for sale for FIFO: Units (19 + 25 + 50) ............................................................... 94 Amount ($266 + 375 + 800) .................................................. $1,441 Ending inventory: 94 units – 68 units = 26 . Ending inventory (26 units x $16) ......................................... $ 416 Cost of goods sold ($1,441 – $416) ....................................... $1,025 Inventory turnover = Cost of Goods Sold = $1,025 = 3.01 Average Inventory ($266+$416)/2 CASE B – LIFO: Goods available for sale for LIFO:
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Unformatted text preview: Units (19 + 25 + 50). .............................................................. 94 Amount ($190 + 375 + 800). ................................................. $1,365 Ending inventory: 94 units – 68 units = 26 . Ending inventory (19 units x $10 + 7 units x $15). ............... $ 295 Cost of goods sold ($1,365 – $295). ...................................... $1,070 Inventory turnover = Cost of Goods Sold = $1,070 = 4.41 Average Inventory ($190+$295)/2 The FIFO inventory turnover ratio is normally thought to be a more accurate indicator when prices are changing because LIFO can include very old inventory prices in ending inventory balances....
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