FIFO versus LIFO versus average cost (Learning Objectives 2 & 3) 15–20 min.

Assume that McCormack Tire completed the following perpetual inventory transactions for a line of tires.

28 tires @ $193 35 tires @ $185 42 tires @ $284 Beginning Inventory.................................................................................

Purchase..................................................................................................

Sale..........................................................................................................

Requirements 1. Compute cost of goods sold and gross profit under FIFO.

2. Compute cost of goods sold and gross profit using LIFO.

3. Compute cost of goods sold and gross profit using average cost. Round average cost per unit to the nearest cent and all other amounts to the nearest dollar.

4. Which method results in the largest gross profit and why?

AppendixLO1