Comparing cost of goods sold in a perpetual system—FIFO, LIFO, and average-cost methods
Assume that a JR Tire Store completed the following perpetual inventory transactions for a line of tires:
|
Beginning inventory |
16 tires @ $65 |
|
Purchase |
10 tires @ $78 |
|
Sale |
12 tires @ $90 |
Requirements
1. Compute cost of goods sold and gross profit using FIFO.
2. Compute cost of goods sold and gross profit using LIFO.
3. Compute cost of goods sold and gross profit using average-cost. (Round average cost per unit to the nearest cent and all other amounts to the nearest dollar.)
4. Which method results in the largest gross profit and why?