Reference no: EM132835871
Mannisto Inc. uses the FIFO inventory cost flow assumption. In a year of rising costs and prices, the firm reported net income of $289,414 and average assets of $1,487,380. If Mannisto had used the LIFO cost flow assumption in the same year, its cost of goods sold would have been $45,720 more than under FIFO, and its average assets would have been $37,800 less than under FIFO.
Required:
Problem a. Calculate the firm's ROI under each cost flow assumption (FIFO and LIFO)
Problem b. Suppose that two years later costs and prices were falling. Under FIFO, net income and average assets were $331,864 and $1,755,400, respectively. If LIFO had been used through the years, inventory values would have been $40,800 less than under FIFO, and current year cost of goods sold would have been $24,232 less than under FIFO. Calculate the firm's ROI under each cost flow assumption (FIFO and LIFO).
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