At the beginning of July, Travelers' Favorite Luggage holds 15 units of its only product with a per-unit cost of $560. During July, Travelers' Favorite sells 40 units. A summary of purchases during the current period follows:
Assume that Travelers' Favorite 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.
A. Compute cost of goods sold for July under both scenarios:
1. If the third purchase is made during July
2. If the third purchase is delayed to August
B. Discuss the effect of LIFO liquidation on profit for this company.

Question

At the beginning of July, Travelers' Favorite Luggage holds 15 units of its only product with a per-unit cost of $560. During July, Travelers' Favorite sells 40 units. A summary of purchases during the current period follows:
  Assume that Travelers' Favorite 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.
A. Compute cost of goods sold for July under both scenarios:
1. If the third purchase is made during July
2. If the third purchase is delayed to August
B. Discuss the effect of LIFO liquidation on profit for this company.

Quizplus · Accepted Answer

The Answer of At the beginning of July, Travelers' Favorite Luggage holds 15 units of its only product with a per-unit cost of $560. During July, Travelers' Favorite sells 40 units. A summary of purchases during the current period follows:
  Assume that Travelers' Favorite 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.
A. Compute cost of goods sold for July under both scenarios:
1. If the third purchase is made during July
2. If the third purchase is delayed to August
B. Discuss the effect of LIFO liquidation on profit for this company.

At the Beginning of July, Travelers' Favorite Luggage Holds 15