Pepper & Penson, a partnership, had these inventory data: Pepper and Penson need to know the companys
Question:
Pepper and Penson need to know the companys gross profit percentage and rate of inventory turnover for 2014 under
1. FIFO.
2. LIFO.
Which method produces a higher gross profit percentage? Inventoryturnover?
2013 2014 Ending inventory at: FIFO Cost... LIFO Cost... $12,000 24,000 7,000 14,000 Cost of goods sold at: FIFO Cost... LIFO Cost. S80,800 90,800 158,000 Sales revenuc
Step by Step Answer:
Req 1 and 2 1 2 FIFO LIFO Gross profit percentage 158000 80800 15...View the full answer
Financial Accounting
ISBN: 978-0133427530
10th edition
Authors: Walter Harrison, Charles Horngren, William Thomas
Related Video
Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.
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