Question

1(c)

Assume that beginning inventory for ABC is 2,300,000 kg. Ending inventory is 3,800,000 kg. The fruit prices and amount purchased is provided in Table 1 below. Compute the LIFO and FIFO COGS for ABC for the period. If ABC wishes to report a larger profit, should LIFO or FIFO be used?

Table 1: Fruit Prices and Amount Bought Date Price per ko ($) Kg Bought (thousands) Addition to Inventory (in thousands of $) Jan 1.2 Feb Mar 1.4 1.3 Apr 1.7 2.5 2.3 600 400 250 300 500 400 220 340 600 220 440 355 May Jun Jul Aug Sep Oct Nov Dec Total 2.4 $720 $560 $325 $510 $1,250 $920 $528 $714 $1,620 $638 $1,408 $1,065 $10,258 2.1 2.7 2.9 3.2 4,625 (8 marks)

Answer 1

Calculation of_Imvemtory sold :-( im Thousands) , Opening Amvemtory + Purchase - Closing Inventory 230% + 4625° - 3800 3125 kgs Calculation or cows (L160) (An Thousands] 355 kg Aus Jung May AD $ 1065 NOV. 440 $ 1408 Oct 220 8 638 seb 600 81620 340 3 714 220 $ 528 400 8 920 500 81250 50 S 85 (SOX-7) 3125 kgs LIFO Lot75 $8228 Calculation FIFO (OGS (4m Thousands) 600 kg $ 720 Feb & 560 250 $325 300 X 510 500 8/250 100 8.920 Jul 220 $ 528 Aug 340 $ 714 sep 115 ( 115x27) $ 310.50 312549 FIFO COGS $5897.50 Jam 400 kgs Mar Able Мач, und

Answer:-

LIFO COGS = $8,228 (in thousands)

FIFO COGS = $5,837.50 (in thousands)

Since, Profit = Revenue - COGS

So, Profit will be maximum when COGS will be minimum.

Hence, FIFO COGS will be used to report a larger profit.

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