In its first month of operation, Whispering Winds Corp. purchased 180 units of inventory for $7

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In its first month of operation, Whispering Winds Corp. purchased 180 units of inventory for $7

In its first month of operation, Whispering Winds Corp. purchased 180 units of inventory for $7, then 280 units for $8, and finally 220 units for $9. At the end of the month, 260 units remained.

Compute the amount of phantom profit that would result if the company used FIFO rather than LIFO.

Phantom profits = _______

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Answer 1

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FIFO			Ending inventory
							COGS
250	11	2750
350	12	4200
290	13	3770	290	13	3770
			40	12	480
		10720			4250		6470

LIFO
250	11	2750
350	12	4200
290	13	3770	250	11	2750
			80	12	960
		10720			3710		7010

						Phantom profit	540



FIFO			Ending inventory				COGS
180	7	1260
280	8	2240
220	9	1980	220	9	1980
			40	8	320
		5480			2300		3180


LIFO
180	7	1260
280	8	2240
220	9	1980	180	7	1260
			80	8	640
		5480			1900		3580

						Phantom profit	400

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In its first month of operation, Whispering Winds Corp. purchased 180 units of inventory for $7

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