Ratio Calculations: LIFO and FIFO
Teddie Bower, Inc., reported the following data in its annual financial statements (dollars in thousands):
|
1999 |
2000 |
|
|
Sales |
$333,667 |
$313,456 |
|
Cost of goods sold—LIFO |
32,587 |
44,690 |
|
Cost of goods sold—FIFO |
30,198 |
45,833 |
|
Ending inventory—LIFO |
11,189 |
10,567 |
|
Ending inventory—FIFO |
15,999 |
14,234 |
|
Net income—LIFO |
34,000 |
33,500 |
|
Net income—FIFO |
38,980 |
37,765 |
Required
a. Calculate the number of days’ sales in ending inventory (NDS) under both LIFO and FIFO.
b. Calculate the gross profit percentage under both LIFO and FIFO.
c. Discuss the differences in inventory levels, income, and gross profit under both LIFO and FIFO.
d. Discuss why a firm might prefer LIFO under these circumstances.