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