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What is the effect of remaining on FIFO

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Q1. Dollar sales for 2008 are expected to drop by approximately 8%, as a recession in Lewis's market is forecasted to continue at least through the first three quarters of the year. Total sales are forecasted to be 2,700 cartons. Lewis will be unable to raise its selling price from the 2007 level of $35.75. However , costs are expected to increase to $24 per carton for the whole year. Due to these cost/price pressures, the company wishes to lower its investment in inventory by holding only the essential inventory of 400 cartons at any time during the year. What is the effect of remaining on FIFO, assuming Lewis had adopted FIFO in 2005? What method would you recommend now?

Q2. What is the LIFO reserve in 2005 and 2006? What is the significance of the LIFO reserve number and its increase?

Reference no: EM133186123

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