The t-shirts can be purchased by employees for themselves, family members, suppliers, or customers. You will sell the t-shirts for $25 each. Your boss agrees with your idea and tells you to proceed.

To proceed, you need to find a vendor that can supply you with the t-shirts and build up your inventory.

On 2/1/xxxx you found a vendor that can supply you with t-shirts for $5 each and you purchase 500 t-shirts.

Unfortunately, the vendor you have been working with suddenly went out of business and you must quickly find another vendor. With some success, you do find another vendor however, the cost to you is $15 per t-shirt and you decide to purchase 1,000 t-shirts and you place this order on 2/15/xxxx.

Once again, the second vendor goes out of business and you must find yet another vendor. You do, but things are getting worse. The vendor knows you need the inventory and are desperate. The new vendor decides to charge you $20 per t-shirt. You are getting in orders so you have an idea of what your sales should be, and you have no choice but to purchase 1,100 t-shirts from this vendor at $20 per t-shirt.

To summarize, here are your inventory purchases:

   

Calculate LIFO and compare LIFO against FIFO and determine which methodology you would recommend.

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Date 2/1/xxxx 2/15/xxxx 3/1/xxxx Month April May # of Units June 500 1,000 1,100 Now that you have stocked up on inventory, sales begin coming in. Your sales activity for April, May, and June are as follows: # of Sales 700 800 Cost per Unit 1,000 $5.00 $15.00 $20.00 Date 2/1/xxxx 2/15/xxxx 3/1/xxxx Month April May # of Units June 500 1,000 1,100 Now that you have stocked up on inventory, sales begin coming in. Your sales activity for April, May, and June are as follows: # of Sales 700 800 Cost per Unit 1,000 $5.00 $15.00 $20.00