Question

Brief Exercise 6-36 Effects of Inventory Costing Methods Tyler Company has the following information related to purchases and sales of one of its inventory items. Date Description Units Purchased at Cost Units Sold at Retail 20 units @ $5 30 units @ $8 Sept. 1 Beginning inventory 10 Purchase 20 Sales 25 Purchase Required: 40 units @ $15 25 units at $10 1. Which inventory costing method produces the highest amount for net income? 2. Which inventory costing method produces the lowest amount for taxes? 3. Which inventory costing method produces the highest amount for ending inventory?

Answer 1

1)	FIFO
	Since cost of goods sold will be based on first purchases
	when the cost is low so net income will be high
2)	LIFO
	as cost of goods sold is based on latest prices (high) so low
	net income and low taxes
3)	FIFO