Question

The records at the end of January of the current year for Young Company showed the following for a particular kind of merchandise:

Beginning Inventory at FIFO: 18 Units @ $18 = $324

Beginning Inventory at LIFO: 18 Units @ $14 = $252

January Transactions	Units	Unit Cost				Total Cost
Purchase, January 9	27	$	16			$	432
Purchase, January 20	51		21				1,071
Sale, January 21 (at $39 per unit)	37
Sale, January 27 (at $40 per unit)	26

Required:

1. Compute the inventory turnover ratio for the month of January under the FIFO and LIFO inventory costing methods.

Answer 1

Units in ending inventory = Beginning balance + Purchases - Units sold
= 18 +(27+51) - (37+26)
= 33 units
FIFO Perodic
Ending Inventory Cost =   = 33 units * $21 = $693
Cost of goods sold         = Beiginning inventory + Purchases - Ending Inventory
= $324+$432+$1,071- $693
= $1,134
LIFO Perodic
Ending Inventory Cost =   = 18 units * $14 + 15 units * 16 = $492
Cost of goods sold         = Beiginning inventory + Purchases - Ending Inventory
= $324+$432+$1,071- $492
= $1,263
Inventory turnover ratio = cost of goods sold/ Average inventory
FIFO = $1,134 / ($324+$693/2) = 2.2300
LIFO = $1,263 / ($252+$492/2) = 3.3952
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