Question

Under the last-in, first-out (LIFO) inventory valuation method, a price index for inventory must be established for tax purposes. The quantity weights are based on year-ending inventory levels.

		Unit Price ($)
Product	Ending Inventory	Beginning	Ending
A	500	0.15	0.21
B	50	1.60	1.80
C	100	4.50	4.20
D	60	12.00	13.40

Use the beginning-of-the-year price per unit as the base-period price and develop a weighted aggregate index for the total inventory value at the end of the year. (Round your answer to the nearest integer.)

I =

What type of weighted aggregate price index must be developed for the LIFO inventory valuation?

Laspeyres IndexPaasche index    

Answer 1

		beginning	ending
	end (qo)	Po	p1	po*q0	p1*q0
A	500	0.15	0.21	75	105
B	50	1.6	1.8	80	90
C	100	4.5	4.2	450	420
D	60	12	13.4	720	804
			total	1325	1419

weighted average index I=(1419/1325)*100=

107.09 ~ 107

b)

Paasche index