The management of Munich Company SE is reevaluating the appropriateness of using its present inventory cost flow method. The company requests your help in determining the results of operations for 2017 if either the FIFO or the average-cost method had been used. For 2017, the accounting records show these data:

Purchases were made quarterly as follows.
Quarter Units Unit Cost Total Cost
1.........................50,000.............‚¬2.20....................‚¬110,000
2.........................40,000...............2.40.......................96,000
3.........................45,000...............2.50.....................112,500
4.........................60,000...............2.70.....................162,000
.........................195,000.......................................‚¬480,500
Operating expenses were ‚¬130,000, and the company's income tax rate is 36%.
Instructions
(a) Prepare comparative condensed income statements for 2017 under FIFO and average cost. (Show computations of ending inventory.)
(b) Answer the following questions for management.
(1) Which cost flow method (FIFO or average-cost) produces the more meaningful inventory amount for the statement of financial position? Why?
(2) Which cost flow method (FIFO or average-cost) is more likely to approximate the actual physical flow of goods? Why?
(3) How much more cash will be available for management under average-cost thanunder FIFO? Why?

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Inventories Purchases and Sales Beginning (8,000 units) 16,000 Total net sales (188,000 units) 780,000 Ending (15,000 units) Total cost of goods purchased (195,000 units) 480,500