Bhushan Company has been using LIFO for inventory purposes because it would prefer to keep gross profits low for tax purposes. In its second year of operation (20-2), the controller pointed out that this strategy did not appear to work and suggested that FIFO cost of goods sold would have been higher than LIFO cost of goods sold for 20-2. Is this possible?

REQUIRED

Using the information provided, compute the cost of goods sold for 20-1 and 20-2 comparing the LIFO and FIFOmethods.

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Cost/Unit 20-1 Units Purchase 1 $1.00 100 Purchase 2 Purchase 3 200 2.00 300 3.00 Ending inventory 200 20-2 Units Cost/Unit Beginning inventory Purchase 4 200 $4.00 150 Purchase 5 Purchase 6 250 5.00 350 6.00 Ending inventory 50