Question

Mercer, Inc., and Tivolian Enterprises are competitors in the toy industry. Last year the companies' operations were identical, the only difference between them being that Mercer uses the last-in, first-out inventory costing method and Tivolian uses the first-in, first-out method. Inventory prices increased during the year. The two companies reported the following amounts in their financial statements.


Required
a. Which company had a higher inventory turnover?
b. If all the companies' results were identical, including the number of items sold and the number remaining in inventory, why do their inventory turnover ratios differ? Should the difference influence your evaluation of the twofirms?


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  • CreatedFebruary 21, 2014
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