Problem 5.6. Analyzing and Interpreting the Effects of the LIFO/FIFO Choice on Inventory Turnover Ratio The records at the end of January 2012 for All Star Company showed the following for a particular kind of merchandise: Inventory, December 31, 2011 at FIFO 19 Units @ $16 $304 Inventory, December 31, 2011 at LIFO 19 Units @ $10 $190 Transactions Units Unit Cost Total Cost Purchase, January 9, 2012 25 $14 $350 Purchase, January 20, 2012 50 19 950 Sale, January 21, 2012 (at $38 per unit) 40 Sale, January 27, 2012 (at $39 per unit) 28 Required: Compute the inventory turnover ratio under the FIFO and LIFO inventory costing methods (show computations and round to the nearest dollar). Explain which you believe is the more accurate indicator of the efficiency of inventory management.
Problem 5.6. Analyzing and Interpreting the Effects of the LIFO/FIFO Choice on Inventory Turnover Ratio The records at the end of January 2012 for All Star Company showed the following for a particular kind of merchandise: Inventory, December 31, 2011 at FIFO 19 Units @ $16 $304 Inventory, December 31, 2011 at LIFO 19 Units @ $10 $190 Transactions Units Unit Cost Total Cost Purchase, January 9, 2012 25 $14 $350 Purchase, January 20, 2012 50 19 950 Sale, January 21, 2012 (at $38 per unit) 40 Sale, January 27, 2012 (at $39 per unit) 28 Required: Compute the inventory turnover ratio under the FIFO and LIFO inventory costing methods (show computations and round to the nearest dollar). Explain which you believe is the more accurate indicator of the efficiency of inventory management.
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Problem 5.6. Analyzing and Interpreting the Effects of the LIFO/FIFO Choice on
Inventory Turnover Ratio
The records at the end of January 2012 for All Star Company showed the following for a
particular kind of merchandise:
Inventory, December 31, 2011 at FIFO 19 Units @ $16 $304
• Inventory, December 31, 2011 at LIFO 19 Units @ $10 $190
Transactions
Units
Unit Cost
Total Cost
Purchase, January 9, 2012
25
$14
$350
Purchase, January 20, 2012
50
19
950
Sale, January 21, 2012 (at $38 per unit)
40
Sale, January 27, 2012 (at $39 per unit)
28
Required: Compute the inventory turnover ratio under the FIFO and LIFO inventory costing
methods (show computations and round to the nearest dollar). Explain which you believe is
the more accurate indicator of the efficiency of inventory management.
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