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.

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