E7-15 Alternative Inventory Methods Habicht Company was formed in 2018 to produce a single product. The production and sales for the next 4 years were as follows: Production Sales Units Total Costs Units Sales Units in Ending Revenue Inventory 2018 100,000 $200,000 80,000 $400,000 20,000 2019 120,000 234,000 110,000 550,000 30,000 2020 130,000 247,000 150,000 750,000 10,000 2021 130,000 240,500 120,000 600,000 20,000 Required: 1. Determine the gross profit for each year under each of the following periodic inventory methods: a. FIFO b. LIFO c. Average cost (Round unit costs to 3 decimal places.) 2. Next Level Explain whether the company’s return on assets (net income divided by average total assets) would be higher under FIFO or LIFO.
E7-15 Alternative Inventory Methods Habicht Company was formed in 2018 to produce a single product. The production and sales for the next 4 years were as follows:
Production Sales
Units Total Costs Units Sales Units in Ending Revenue Inventory
2018 100,000 $200,000 80,000 $400,000 20,000
2019 120,000 234,000 110,000 550,000 30,000
2020 130,000 247,000 150,000 750,000 10,000
2021 130,000 240,500 120,000 600,000 20,000
Required:
1. Determine the gross profit for each year under each of the following periodic inventory methods:
a. FIFO
b. LIFO
c. Average cost (Round unit costs to 3 decimal places.)
2. Next Level Explain whether the company’s return on assets (net income divided by average total assets) would be higher under FIFO or LIFO.
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