Tire company perpetual inventory records for a tire it produces and sells
|
Number of units
|
Cost per unit
|
|
Beginning inventory
|
6,000
|
$12.25
|
|
Transfers to finished goods
|
|
|
|
March 3
|
12000
|
12.20
|
|
June 28
|
15000
|
12.10
|
|
Sept 12
|
11000
|
12.05
|
|
Nov 30
|
17000
|
11.95
|
|
Sales:
|
|
|
|
March 7
|
11000
|
|
|
July 8
|
18000
|
|
|
October 12
|
8000
|
|
|
December 7
|
16000
|
|
The company sold 53,000 tires during the year at $20 each
Questions:
A) Compute the cost of the ending inventory and the cost of goods sold using both FIFO and LIFO
B) Which of the two methods is a better representation of the balance sheet value for the inventory? Why?
C) What is the gross margin using each method?
D) Which method do you think is more representative of the firm's income? Why?