Question

In its first month of operation, Vaughn Manufacturing purchased 320 units of inventory for $8, then 420 units for $9, and finally 360 units for $10. At the end of the month, 400 units remained. Compute the amount of phantom profit that would result if the company used FIFO rather than LIFO. Phantom profit $ 2380

Answer 1

Correct answer--------$680

Working

The difference in cost of goods sold between FIFO and LIFO is the difference in profit of the comany.

	FIFO	LIFO	Difference
Ending Inventory	$                   3,960	$             3,280	$ 680
Cost of Goods Sold	$                   5,980	$             6,660	$ 680

.

FIFO
Total Units Avalable for sale		1100
Units Sold		700
Closing Stock in Units		400
Valuation
Ending Inventory	360	@	$             10.00	$ 3,600
	40	@	$               9.00	$ 360
Value Of Ending Inventory				$              3,960
Cost of Goods sold				$              5,980

.

LIFO
Total Units Avalable for sale		1100
Units Sold		700
Closing Stock in Units		400
Valuation
Ending Inventory	320	@	$               8.00	$ 2,560
	80	@	$               9.00	$ 720
Value Of Ending Inventory				$              3,280
Cost of Goods sold				$              6,660