Stirling Corporation and Bute Inc. have similar types of inventory. At the end of the current year,

Question:

Stirling and Bute Inc. have similar types of inventory. At the end of the current year, Stirling reported an average inventory amount of $10,000, calculated using the FIFO cost formula. Bute reported an average inventory amount of $12,000, calculated using the average cost formula. Stirling reported cost of goods sold of $200,000, while Bute reported cost of goods sold of $180,000. Inventory prices have been falling during the current year.
(a) Calculate the for each company.
(b) How might the fact that Stirling and Bute use different inventory cost formulas affect your comparison of the between the two companies?
Inventory Turnover Ratio
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