Explain whether the company’s return on assets would be higher under FIFO or LIFO 2 answers below »
Alternative Inventory Methods – The Habicht Company was formed in 2006 to produce a single product. The production and sales for the next four years were as follows:
Production
Sales
Units
Total Costs
Units
Sales Revenue
Units in Ending Inventory
2006
100,000
$200,000
80,000
$400,000
20,000
2007
120,000
234,000
110,000
550,000
30,000
2008
130,000
247,000
150,000
750,000
10,000
2009
130,000
240,500
120,000
600,000
20,000
Required
1. Determine the gross profit for each year under each of the following periodic inventory methods:
a. FIFO
b. LIFO
c. Average cost (round unit costs to 3 decimal places)
2. Explain whether the company’s return on assets would be higher under FIFO or LIFO.
