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question analyzing different inventory costing methods farmville tools sells shovels 4287303

Question

Analyzing Different Inventory Costing Methods Farmville Tools sells shovels nationwide to farmers. For March, Farmville had beginning inventory of 270 shovels with a per-shovel cost of $15. During March, Farmville made the following purchases of additional shovels. Farmville uses a perpetual inventory system.

During March, 525 shovels were sold on the following dates:

Required: Round intermediate calculations to the nearest penny. Use rounded amounts in subsequent computations. If required, round final answers to the nearest penny.

a. Determine the appropriate balance in ending inventory and cost of goods sold under each of the inventory cost flow assumptions (LIFO, FIFO, and moving average).

Ending Inventory Cost of Goods Sold

FIFO

LIFO

Moving average

b. Compute the inventory turnover and days-in-inventory ratios under each inventory costing method. Round your intermediate calculations to two decimal places. Then round the final answer for Inventory turnover ratio to two decimal places and days-in-inventory to one decimal place.

Inventory Turnover Ratio Days-in-inventory Ratio

FIFO

LIFO

Moving average

c. Farmville Tool will experience different ratio results depending on which inventory method it chooses. The inventory method yields the most effective inventory turnover ratio. The amount of inventory sold is under all three methods. Select the reason Farmville Tool's inventory turnover is higher under LIFO than the other inventory methods. LIFO assigns a lower cost of goods sold. LIFO averages out the costs of inventory during the period. LIFO assigns actual cost of each item sold to cost of goods sold. LIFO assigns a higher cost to cost of goods sold.

March 8 purchse

50

$16.25

March 21 sold

175

 

March 10 sold

100

 

March 22 purchase

115

$18

March 13 purchase

130

$17.50

March 29

60

$18.50

March 17 sold

120

 

March 30

130

 

 

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