Day Company, which uses the FIFO inventory method, had 254,000 units in inventory at the beginning of the year at a FIFO cost per unit of $30. No purchases were made during the year. Quarterly sales information and two sets of end-of-quarter replacement cost figures follow:

The market decline in the first quarter under Case A was expected to be temporary, whereas under Case B the decline was expected to be nontemporary. Declines in other quarters were expected to be permanent.

Required:
Determine cost of goods sold for the four quarters under each case and verify the amounts by computing cost of goods sold using the lower-of-cost-or-market method applied on an annualbasis.

Transcribed Image Text:

Endof Quarter Replacement Cost Quater Unit Sales 100,000 30,000 42,500 30,500 Case A Case B $25 27 19 27 $29 18 4