The recent financial statements of McLelland Clothing Inc. include the following data: Sales ............... $754,690 Cost of

Question:

The recent of McLelland Clothing Inc. include the following data:
Sales ............... $754,690
Cost of goods sold:
Computed under FIFO ........ 528,600
Computed under LIFO ........ 555,000
Average inventory:
Computed under FIFO ........ 72,200
Computed under LIFO ........ 45,800
Required:
1. Calculate McLelland’s gross profit ratio (rounded to two decimal places), (rounded to three decimal places), and the average days to sell inventory (assume a 365-day year and round to two decimal places) using the FIFO inventory costing method. Be sure to explain what each ratio means.
2. Calculate McLelland’s gross profit ratio (rounded to two decimal places), (rounded to three decimal places), and the average days to sell inventory (assume a 365-day year and round to two decimal places) using the LIFO inventory costing method.
Be sure to explain what each ratio means.
3. Which ratios—the ones computed using FIFO or LIFO inventory values—provide the better indicator of how successful McLelland was at managing and controlling its inventory?
Inventory Turnover Ratio
Inventory Turnover RatioThe inventory turnover ratio is a ratio of cost of goods sold to its average inventory. It is measured in times with respect to the cost of goods sold in a year normally. Inventory Turnover Ratio FormulaWhere,... Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...