Evaluate the inventory turnover ratio for 2010

Reference no: EM1374222

A large manufacturer of truck and car tires currently changed its cost-flow assumption method for inventories at the starting of 2010. The manufacturer has been in operation for almost 40 years, and for the last decade, it has reported moderate growth in revenues. The firm changed from the LIFO method to the FIFO method and reported the subsequent information (amounts in millions):

December 31 2009 2010
Inventories at FIFO cost $ 788.10 $861.7
Excess of FIFO cost over LIFO cost $(429.0) $(452.4)
Cost of goods sold (FIFO) - $4,150.8
Cost of goods sold (LIFO) - $4,417.1

Determine the inventory turnover ratio for 2010 using the LIFO and FIFO cost-flow assumption methods. Describe why the costs assigned to inventory under LIFO at the end of 2009 and 2010 are so much less than they are underFIFO.

Reference no: EM1374222

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