Cost flow assumptions—FIFO and LIFO using a periodic system Mower Blower Sales Co. started business on January 20, 2010. Products sold were snow blowers and lawn mowers. Each product sold for $350. Purchases during 2010 were as follows:
|
Blowers |
Mowers |
|
|
January 21 |
20 @ $200 |
|
|
February 3 |
40 @ 195 |
|
|
February 28 |
30 @ 190 |
|
|
March 13 |
20 @ 190 |
|
|
April 6 |
|
20 @ $210 |
|
May 22 |
|
40 @ 215 |
|
June 3 |
|
40 @ 220 |
|
June 20 |
|
60 @ 230 |
|
August 15 |
|
20 @ 215 |
|
September 20 |
|
20 @ 210 |
|
November 7 |
20 @ 200 |
|
The December 31, 2010, inventory included 10 blowers and 25 mowers. Assume the company uses a periodic inventory system.
Required:
a. What will be the difference between ending inventory valuation at December 31, 2010, and cost of goods sold for 2010, under the FIFO and LIFO cost flow assumptions?
b. If the cost of mowers had increased to $240 each by December 1, and if management had purchased 30 mowers at that time, which cost flow assumption was probably being used by the firm? Explain your answer.