The records at the end of January 2012 for Captain Company s

The records at the end of January 2012 for Captain Company showed the following for a particular kind of merchandise nventory, December 31, 2011, at FIFO: 15 Units@ $18-$270 Inventory. December 31, 2011, at LIFO:15 Units @ $14 = $210 Units 27 51 40 27 Total Unit Cost Cost $16 $432 21 1,071 Transactions Purchase, January 9, 2012 Purchase, January 20, 2012 Sale, January 21, 2012 (at $42 per unit) Sale, January 27, 2012 (at $43 per unit) Required: 1. Compute the inventory turnover ratio under the FIFO and LIFO inventory costing methods. (Do not round intermediate calculations and round your final answers to 2 decimal places.) FIFO Inventory turnover ratio LIFO Inventory turnover ratio

Solution

Solution:

1. FIFO inventory turnover ratio = cost of goods sold ÷ Average inventory

= 1,227 ÷ 408

= 3.01 Answer

working:

cost of goods sold = 15x $18 + 27x $16 + 25x $21 = $1,227

ending inventory = 26x $21 =$546

Average inventory = ($270+ $546) ÷2 = $408

2. LIFO inventory turnover ratio = cost of goods sold ÷ Average inventory

= 1,327 ÷ 298

= 4.45 answer

working:

cost of goods sold = 51 x $21 + 16x $16 = $1,327

ending inventory = 11x $16+ 15 x $14 = $386

Average inventory = ($210 + $386)÷ 2 = $298