Analyzing and Interpreting the Effects of the LIFO/FIFO Choice on Inventory Turnover Ratio
The records at the end of January 2012 for Captain Company showed the following for a particular kind of merchandise:
Inventory, December 31, 2011, at FIFO: 19 Units @ $16 = S304
Inventory, December 31, 2011, at LIFO: 19 Units @ $12 = S228
Transactions | Units | Unit Cost | Total Cost |
Purchase. January 9, 2012 | 25 | $14 | $350 |
Purchase. January 20, 2012 | 50 | 19 | 950 |
Sale. January 21, 2012 (at $38 per unit) | 40 |
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Sale. January 27, 2012 (at $39 per unit) | 28 |
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Required:
Compute the inventory turnover ratio under the FIFO and LIFO inventory costing methods (show computations and round to the nearest dollar). Which costing method is the more accurate indicator of the efficiency of inventory management? Explain.
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