ABC sells cars. The start of the year inventory and production of new stocks of the firm
Question:
ABC sells cars. The start of the year inventory and production of new stocks of the firm is shown in the following table. Table 1: Start of the year inventory and production of the firm. Transaction Total Units Unit Cost Total Costs 1 April 2021 Starting inventory 1500 £30 £45000 31 March 2022 Production 2100 £25 £52500 Total 3600 £97500 Due to advances in technology, Fonda has a fall in the unit cost of its inventory. During the year, the firm continue with a selling price of £40 per car and sells 3300 units. This leaves 300 units as the end of the year inventory. Based on this information, answer the following questions:
(i) Using the LIFO method, determine the cost of goods sold and ending inventory.
(ii) Using the FIFO method, determine the cost of goods sold and ending inventory.
(iii) Using the weighted average cost method, determine the cost of goods sold and ending inventory.
(iv) Discuss the benefits of choosing the FIFO and LIFO method.
Principles of Corporate Finance
ISBN: 978-1259144387
12th edition
Authors: Richard Brealey, Stewart Myers, Franklin Allen