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Question 5 2 pts Simon Cereal purchased 100 pounds of cornflakes for $100. Transportation cost to Simons production facility

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Answer #1
Question 5 Purchase cost of cornflakes for 100 pounds $100.00
Transportation cost $0.00 (Note 1)
Packing cost $60.00
Total cost $160.00
Total pounds 100
Cost of each pound $1.60
Note1 Transportation cost has not been included in the costing. As purchase was FOB Destination. It means purchase cost
$100 includes transportation of $25, hence no need to add it again.
Question 6 During the year of rising prices and increasing inventory:
LIFO will report inventory at old prices or reduced prices resulting in UNDERSTATEMENT OF INVENTORY(current assets)
FIFO will report inventory at new prices or increased prices resulting in OVERSTATEMENT OF INVENTORY(current asset)
Working capial ratio is
Current assets/Current liabilities
Under LIFO current assets will be lower, because of lower valuation of inventory, hence, Working capial ratio under LIFO would be smallest.
LIFO correct answer

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