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Terpsichore Company uses a perpetual inventory system For 2010 and

Terpsichore Company uses a perpetual inventory system. For 2010 and 2011, Terpsichore has the following data:

Required:

1. For each year, compute cost of goods sold, the cost of ending inventory, and gross margin using FIFO.

2. For each year, compute cost of goods sold, the cost of ending inventory, and gross margin using LIFO.

3. For each year, compute cost of goods sold, the cost of ending inventory, and gross margin using the average cost method.

4. Which method would result in the lowest amount paid for taxes?

5. Which method produces the most realistic amount for income? For inventory? Explain your answer.

6. Compute Terpsichore’s gross profit ratio and inventory turnover ratio under each of the three inventory costing methods. (Note: Round answers to two decimal places.) How would the choice of inventory costing method affect these ratios?

Required:

1. For each year, compute cost of goods sold, the cost of ending inventory, and gross margin using FIFO.

2. For each year, compute cost of goods sold, the cost of ending inventory, and gross margin using LIFO.

3. For each year, compute cost of goods sold, the cost of ending inventory, and gross margin using the average cost method.

4. Which method would result in the lowest amount paid for taxes?

5. Which method produces the most realistic amount for income? For inventory? Explain your answer.

6. Compute Terpsichore’s gross profit ratio and inventory turnover ratio under each of the three inventory costing methods. (Note: Round answers to two decimal places.) How would the choice of inventory costing method affect these ratios?

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