At the beginning of July, Pulman Luggage holds 15 units of its only product with a per-unit cost of $140. During July, Pulman sells 40 units. A summary of purchases during the current period follows:

Assume that Pulman utilizes the LIFO method and instead of making the third purchase during July, the company allows its inventory level to decline by delaying the third purchase until August.
Required:
a. Compute cost of goods sold for July if the third purchase is made during July.
b. Compute cost of goods sold for July if the third purchase is delayed to August.
c. Discuss the effect on July profit if the company delays the third purchase until August.

Question

At the beginning of July, Pulman Luggage holds 15 units of its only product with a per-unit cost of $140. During July, Pulman sells 40 units. A summary of purchases during the current period follows:
 
 Assume that Pulman utilizes the LIFO method and instead of making the third purchase during July, the company allows its inventory level to decline by delaying the third purchase until August.
Required:
a. Compute cost of goods sold for July if the third purchase is made during July.
b. Compute cost of goods sold for July if the third purchase is delayed to August.
c. Discuss the effect on July profit if the company delays the third purchase until August.

Quizplus · Accepted Answer

The Answer of At the beginning of July, Pulman Luggage holds 15 units of its only product with a per-unit cost of $140. During July, Pulman sells 40 units. A summary of purchases during the current period follows:
 
 Assume that Pulman utilizes the LIFO method and instead of making the third purchase during July, the company allows its inventory level to decline by delaying the third purchase until August.
Required:
a. Compute cost of goods sold for July if the third purchase is made during July.
b. Compute cost of goods sold for July if the third purchase is delayed to August.
c. Discuss the effect on July profit if the company delays the third purchase until August.

At the Beginning of July, Pulman Luggage Holds 15 Units