For this assignment, you have another brilliant idea that you want to propose to your manager. You want to sell t-shirts on the company intranet site to employees to generate additional revenue for the company. The t-shirts can be purchased by employees for themselves, family members, suppliers, or customers. You will sell the t-shirts for $25 each. Your manager agrees with your idea and tells you to proceed.

To proceed, you need to find a vendor that can supply you with the t-shirts to build up your inventory.

On 2/1/xxxx you found a vendor that can supply you with t-shirts for $5 each and you purchase 500 t-shirts.

Unfortunately, the vendor you have been working with suddenly went out of business and you must quickly find another vendor. With some success, you do find another vendor however, the cost to you is $15 per t-shirt and you decide to purchase 1,000 t-shirts. You place this order on 2/15/xxxx.

Once again, the second vendor goes out of business and you must find yet another vendor. You do, but things are getting worse. The vendor knows you need the inventory and are desperate. The new vendor decides to charge you $20 per t-shirt. You are getting in orders so you have an idea of what your sales should be, and you have no choice but to purchase 1,100 t-shirts from this vendor at $20 per t-shirt.

To summarize, here are your inventory purchases:

Date	# of Units	Cost per Unit
2/1/xxxx	500	$5.00
2/15/xxxx	1,000	$15.00
3/1/xxxx	1,100	$20.00

Now that you have stocked up on inventory, sales begin coming in. Your sales activity for April, May, and June are as follows:

Month	# of Sales
April	700
May	800
June	1,000

Once you have performed your analysis, determine which inventory methodology would be better to use based on the gross profit.

Once you have made a decision, you are to submit a memo to your boss and include the following:

Introduction

• Recap the idea
• Explain that you are preparing this memo to differentiate the gross profit based on an inventory methodology.

LIFO

• Explain what LIFO is and its financial impacts.
• Why would some industries use LIFO over FIFO?
• What are the results using the LIFO inventory methodology?

FIFO

• Explain what FIFO is and its financial impacts.
• Why would some industries use FIFO over LIFO?
• What are the results using the FIFO inventory methodology?

Conclusion

• What is your recommendation to your boss based on your calculations?