Impact on Profit of Failure to Replace LIFO Layers
Harrison Lumber Company uses a periodic LIFO method for inventory costing. The following information relates to the plywood inventory carried by Harrison Lumber.
Plywood inventory:
|
Date |
|
Quantity |
LIFO Costing Layers |
|
May |
1 |
600 sheets |
300 sheets at $800 |
|
|
|
|
225 sheets at $1100 |
|
|
|
|
75 sheets at $1300 |
Plywood purchases:
|
May |
8 |
115 sheets at $1400 |
|
|
17 |
95 sheets at $1500 |
|
|
29 |
200 sheets at $1450 |
All sales of plywood during May were at $20 per sheet. On May 31, there were 360 sheets of plywood in the storeroom.
1. Compute the gross profit on sales for May, as a dollar value and as a percentage of sales.
2. Assume that because of a lumber strike, Harrison Lumber is not able to purchase the May 29 order of lumber until June 10. Assuming sales remained the same, recomputed the gross profit on sales for May, as a dollar value and as a percentage of sales.
3. Compare the results of (1) and (2) and explain the difference.