1. Lambda Foods

Scenario: FIFO vs. Average Cost Method

Data:

• Beginning Inventory: 5,000 units at $10 per unit
• Purchases: 8,000 units at $12 per unit
• Ending Inventory: 4,000 units
• Sales: 9,000 units

Requirements:

1. Calculate the Cost of Goods Sold using the FIFO method for Lambda Foods.
2. Calculate the Cost of Goods Sold using the Average Cost method.
3. Compare the COGS under FIFO and Average Cost methods.
4. Discuss the impact of inventory valuation methods on COGS and financial statements.
5. Evaluate which method (FIFO or Average Cost) Lambda Foods should use based on financial reporting objectives.