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Explain the financial effects of fifo and lifo

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Reference no: EM13343441

Sunny Company reports the following inventory data for December 2010:

1 December Inventory on hand 100 units @ $20 each
6 December Purchases 200 units @ $21 each
12 December Purchases 300 units @ $22 each
22 December Sale 530 units
28 December Purchases 400 units @ $23 each

a) Using the perpetual inventory system, determine the cost of goods sold for December 2010 and cost of inventory on hand at 31 December 2010 under the following cost flow methods:

i) First-in, first out (FIFO) method
ii) Last-in, first out (LIFO) method
iii) Weighted average method

b) Using the above figures, explain the financial effects of FIFO, LIFO and weighted-average method when inventory unit costs are increasing.

Reference no: EM13343441

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