Question

The units of Manganese Plus available for sale during the year were as follows:

Mar. 1	Inventory	21 units	@ $30	$630
June 16	Purchase	30 units	@ $34	1,020
Nov. 28	Purchase	38 units	@ $37	1,406
		89 units		$3,056

There are 14 units of the product in the physical inventory at November 30. The periodic inventory system is used. Determine the difference in gross profit between the LIFO and FIFO inventory cost systems. Enter the answer as a positive number.

$

Answer 1

Under the First in first out (FIFO) method of inventory valuation, Cost of goods sold consists of the units from beginning inventory and earliest purchases. Ending inventory consists of the units from recent purchases

Cost of goods sold = (21*$30) + (30*$34) + [(38-14)*$37]

= $630 + $1,020 + $888

= $2,538

Under the Last in first out (LIFO) method of inventory valuation, Cost of goods sold consists of the units from recent purchases. Ending inventory consists of the units from beginning inventory and earliest purchases.

Cost of goods sold = [(21-14)*$30] + (30*$34) + (38*$37)

= $210 + $1,020 + $1,406

= $2,636

The difference in gross profit between the LIFO and FIFO inventory cost systems = Difference in Cost of goods sold

= $2,636 - $2,538

= $98