Tuesday
October 21, 2014

Homework Help: edit plz!

Posted by thara on Friday, July 30, 2010 at 8:24pm.

What factors should Precision consider in choosing between the FIFO and average cost formulas?

(((ANSWER)))The sales and the operating expense are the same under both FIFO and average. But the cost of goods sold amounts are different. For this case, the price is rising, so it will have a higher profit than using average. This happens because the expenses matched against revenues are the lower unit costs of the first units purchased. Then, the ending inventory will be higher. So in the balance sheet, the asset will be higher. And the current ratio will be higher. If prices are falling, the results from the use of FIFO and average are reversed. FIFO will report the lower profit and average the higher. If prices are stable, both cost formulas will report the same results.

IS DIS CORRECT ADN IF ANY MISTAKE CAN U EDIT PLZ.THANKS

Answer this Question

First Name:
School Subject:
Answer:

Related Questions

Intermediate Accounting 305 - You have just been hired as a consultant to ...
Accounting urgent Edit - The management of Stampfer Inc. asks your help in ...
finance - Bristol Sales had the following transactions for DVDís in 2012, its ...
Finance accounting - Eddings Company had a beginning inventory of 400 units of ...
cuyamaca - Eddings Company had a beginning inventory of 400 units of Product XNA...
finance - The following information pertains to Porter Company for 2011. ...
accounting-explain - Create a table comparing the gross profit for this productí...
edit plz! - If this business switches to use FIFO, the cost of goods sold will ...
accounting - Jones Company had 100 units in beginning inventory at a total cost ...
Business Math - Being inventory of 12 sets of paints at a cost of $1.50 each. ...

Search
Members