Dollar sales for 2012 are expected to drop by approximately 8%, as a recession in Lewis’s market is forecasted to continue at least through the first three quarters of the year. Total sales are forecasted to be 2,700 cartons. Lewis will be unable to raise its selling price from the 2011 level of $35.75. However, costs are expected to increase to $24 per carton for the whole year. Due to these cost price pressures, the corporation wishes to lower its investment in inventory by holding only the essential inventory of 400 cartons at any time during the year. What is the effect of remaining on FIFO, assuming Lewis had adopted FIFO in 2009? What is the effect of remaining on LIFO, assuming Lewis adopted LIFO in 2009? What method would you recommend now? Lewis Corporation had traditionally used the FIFO method of inventory valuation. You are giventhe information shown in Exhibit 1 on transactions during the year affecting Lewis's inventoryaccount. (The purchases are in sequence during the year. The company uses a periodic inventorymethod.)EXHIBIT 1: Inventory Transactions 2009-20112009Beginning balance1,840cartons @$20.00Purchases600 cartons @20.25cartons@21.00800400 cartons @21.25cartons @21.502002,820 cartons @Sales34.00Beginning balance1,020cartonsPurchases700 cartons @ 21.50700 cartons @ 21.50cartons @ 22.007001,000 cartons @22.25Sales3,080 cartons @35.751,040 cartonsBeginning balancePurchases1,000 cartons @22.50700 cartons (a)22.75700 cartons a23.00700 cartons(a)23.50Sales2,950 cartons(a)35.7520102011

Inventory Valuation: Inventory is an asset for the organization and financial value of unsold…

Answered: Dollar sales for 2012 are expected to…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

Dollar sales for 2012 are expected to drop by approximately 8%, as a recession in Lewis’s market is forecasted to continue at least through the first three quarters of the year. Total sales are forecasted to be 2,700 cartons. Lewis will be unable to raise its selling price from the 2011 level of $35.75. However, costs are expected to increase to $24 per carton for the whole year. Due to these cost price pressures, the corporation wishes to lower its investment in inventory by holding only the essential inventory of 400 cartons at any time during the year. What is the effect of remaining on FIFO, assuming Lewis had adopted FIFO in 2009? What is the effect of remaining on LIFO, assuming Lewis adopted LIFO in 2009? What method would you recommend now?