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    Case 6-2 Lewis Corp

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    Sourav Mookerjee
    Using different inventory costing methods such as FIFO, LIFO, and average cost results in different ending inventory values and profits. FIFO typically generates the highest profit when prices are increasing, while LIFO maximizes profit when prices are decreasing by valuing inventory at lower past costs. The average cost method calculates an average weighted cost of all inventory items. Of the three methods compared in the document, FIFO provided the highest profit after taxes each year.

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    Case 6-2 Lewis Corp

    Uploaded by

    Sourav Mookerjee
    6 views9 pages
    Using different inventory costing methods such as FIFO, LIFO, and average cost results in different ending inventory values and profits. FIFO typically generates the highest profit when prices are increasing, while LIFO maximizes profit when prices are decreasing by valuing inventory at lower past costs. The average cost method calculates an average weighted cost of all inventory items. Of the three methods compared in the document, FIFO provided the highest profit after taxes each year.

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    CASE 6-2 LEWIS CORP..xlsx

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    Using different inventory costing methods such as FIFO, LIFO, and average cost results in different ending inventory values and profits. FIFO typically generates the highest profit when prices are increasing, while LIFO maximizes profit when prices are decreasing by valuing inventory at lower past costs. The average cost method calculates an average weighted cost of all inventory items. Of the three methods compared in the document, FIFO provided the highest profit after taxes each year.

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    © All Rights Reserved
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    6 views9 pages

    Case 6-2 Lewis Corp

    Uploaded by

    Sourav Mookerjee
    Using different inventory costing methods such as FIFO, LIFO, and average cost results in different ending inventory values and profits. FIFO typically generates the highest profit when prices are increasing, while LIFO maximizes profit when prices are decreasing by valuing inventory at lower past costs. The average cost method calculates an average weighted cost of all inventory items. Of the three methods compared in the document, FIFO provided the highest profit after taxes each year.

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    © All Rights Reserved
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    of 9

    USING FIFO METHOD OF INVEN

    FIFO METHOD
    Particulars
    1 Opening Balance

    Total of Opening Balance


    2 Purchases

    Total of Purchase
    3 Sales
    4 Cost of Goods Sold

    Total of COGS
    5 Inventory

    6 Gross Profit
    7 Taxes @ 40 %
    8 Profit After Tax

    2009
    Quantity Rate Total Quantity
    1840 20.00 36800
    420
    400
    200
    1020
    600 20.25 12150
    700
    800 21.00 16800
    700
    400 21.25 8500
    700
    200 21.50 4300
    1000
    2000
    41750
    3100
    2820 34.00 95880
    3080
    1840 20.00 36800
    420
    600 20.25 12150
    400
    380 21.00 7980
    200
    700
    700
    660
    2820
    56930
    420 21.00 8820
    40
    400 21.25 8500
    1000
    200 21.50 4300
    1020
    21620
    38950
    15580
    23370

    2010

    METHOD OF INVENTORY CALCULATION


    2010
    2011
    2012
    Rate
    Total
    Quantity Rate
    Total
    Quantity Rate
    Total
    21
    8820
    40
    22
    880
    490
    23
    11270
    21.25
    8500
    1000
    22.25
    22250
    700
    23.5
    16450
    21.5
    4300
    0
    21620
    1040
    23130
    27720
    21.5
    15050
    1000
    22.5
    22500
    1510
    24
    36240
    21.5
    15050
    700
    22.75
    15925
    400
    24
    9600
    22
    15400
    700
    23
    16100
    22.25
    22250
    700
    23.5
    16450
    67750
    3100
    70975
    45840
    35.75
    110110
    2950
    35.75 105462.5
    2700
    35.75
    96525
    21
    8820
    40
    22
    880
    490
    23
    11270
    21.25
    8500
    1000
    22.25
    22250
    700
    23.5
    16450
    21.5
    4300
    1000
    22.5
    22500
    1510
    24
    36240
    21.5
    15050
    700
    22.75
    15925
    21.5
    15050
    210
    23
    4830
    22
    14520
    66240
    66385
    63960
    22
    880
    490
    23
    11270
    400
    24
    9600
    22.25
    22250
    700
    23.5
    16450
    23130
    43870
    17548
    26322

    27720
    39077.5
    15631
    23446.5

    9600
    32565
    13026
    19539

    USING LIFO METHOD OF INVENT


    Particulars
    1 Opening Balance

    Total of Opening Balance


    2 Purchases

    Total of Purchase
    3 Sales
    4 Cost of Goods Sold

    Total of COGS
    5 Inventory

    6 Gross Profit
    7 Taxes @ 40 %
    8 Profit After Tax

    2009
    Quantity Rate Total Quantity
    1840 20.00 36800
    1020

    600
    800
    400
    200
    2000
    2820
    200
    400
    800
    600
    820

    20.25
    21.00
    21.25
    21.50
    34.00
    21.50
    21.25
    21.00
    20.25
    20.00

    36800
    12150
    16800
    8500
    4300
    41750
    95880
    4300
    8500
    16800
    12150
    16400

    2820
    58150
    1020 20.00 20400
    0
    0
    1020
    20400
    37730
    15092
    22638

    1020
    700
    700
    700
    1000
    3100
    3080
    1000
    700
    700
    680

    20
    1020

    2010

    METHOD OF INVENTORY CALCULATION


    2010
    2011
    2012
    Rate
    Total
    Quantity Rate
    Total
    Quantity Rate
    Total
    20
    20400
    1020
    20
    20400
    1020
    20
    20400
    0
    20
    21.5
    430
    20
    21.5
    430
    0
    0
    150
    22.5
    3375
    20400
    1040
    20830
    24205
    21.5
    15050
    1000
    22.5
    22500
    1510
    24
    36240
    21.5
    15050
    700
    22.75
    15925
    400
    24
    9600
    22
    15400
    700
    23
    16100
    22.25
    22250
    700
    23.5
    16450
    67750
    3100
    70975
    45840
    35.75
    110110
    2950
    35.75 105462.5
    2700
    35.75
    96525
    22.25
    22250
    700
    23.5
    16450
    1910
    24
    45840
    22
    15400
    700
    23
    16100
    150
    22.5
    3375
    21.5
    15050
    700
    22.75
    15925
    20
    21.5
    430
    21.5
    14620
    850
    22.5
    19125
    620
    20
    12400
    0
    0
    0
    67320
    2950
    67600
    62045
    21.5
    430
    150
    22.5
    3375
    400
    20
    8000
    20
    20400
    20
    21.5
    430
    1020
    20
    20400
    20830
    24205
    8000
    42790
    37862.5
    34480
    17116
    15145
    13792
    25674
    22717.5
    20688

    USING AVERAGE COST METHOD OF IN


    Particulars
    1 Opening Balance

    Total of Opening Balance


    2 Purchases

    Total of Purchase
    AVERAGE COST
    3 Sales
    4 Cost of Goods Sold
    Total of COGS
    5 Inventory

    2009
    Quantity Rate Total
    Quantity
    1840 20.00
    36800
    1020

    1840
    600
    800
    400
    200
    2000
    3840
    2820
    2820
    2820
    1020

    1020
    6 Gross Profit
    7 Taxes @ 40 %
    8 Profit After Tax

    20.25
    21.00
    21.25
    21.50

    34.00
    20.46
    20.46

    36800
    12150
    16800
    8500
    4300
    41750
    20.45573
    95880
    57685.16
    57685.16
    20864.84
    0
    0
    20864.84
    38194.84
    15277.94
    22916.9

    1020
    700
    700
    700
    1000
    3100
    4120
    3080
    3080
    1040

    2010

    OST METHOD OF INVENTORY CALCULATION


    2010
    2011
    2012
    Rate
    Total
    Quantity Rate
    Total
    Quantity Rate
    Total
    20.45573 20864.84
    1040 21.50846 22368.8
    1190 22.54681 26830.7
    0
    0
    0
    0
    0
    0
    20864.84
    1040
    22368.8
    1190
    26830.7
    21.5
    15050
    1000
    22.5
    22500
    1510
    24
    36240
    21.5
    15050
    700
    22.75
    15925
    400
    24
    9600
    22
    15400
    700
    23
    16100
    22.25
    22250
    700
    23.5
    16450
    67750
    3100
    70975
    1910
    45840
    21.50846
    4140
    22.54681
    3100
    23.44216
    35.75
    110110
    2950
    35.75 105462.5
    2700
    35.75
    96525
    21.50846 66246.05
    2950 22.54681 66513.09
    2700 23.44216 63293.84
    66246.05
    2950
    66513.09
    63293.84
    21.50846 22368.8
    1190 22.54681 26830.7
    400 23.44216 9376.865
    0
    0
    0
    22368.8
    26830.7
    9376.865
    43863.95
    38949.41
    33231.16
    17545.58
    15579.76
    13292.46
    26318.37
    23369.65
    19938.7

    COMPARISONS BETWE
    Particulars
    Sales
    Cost of Goods Sold
    Gross Profit
    Taxes @ 40 %
    Profit After Tax

    2009
    95880
    56930
    38950
    15580
    23370
    G

    FIFO
    2010
    2011
    110110.00 105462.50
    66240.00 66385.00
    43870
    39077.5
    17548
    15631
    26322
    23446.5
    G
    G

    2012
    96525
    63960
    32565
    13026
    19539

    OBSERVATIONS :
    1. PROFIT AFTER TAX IS ON HIGHER SIDE IF WE USE FIFO METHOD.
    2. WHEN STOCK PRICE ON AN INCREASING TREND THEN WE SHOULD USE FIFO METHOD
    3. WHEN STOCK PRICE ARE ON DECREASING TREND THEN WE SHALL USE LIFO TO MAX

    RISONS BETWEEN THE METHODS


    2009
    95880
    58150
    37730
    15092
    22638

    LIFO
    2010
    2011
    110110.00 105462.50
    67320.00 67600.00
    42790
    37862.5
    17116
    15145
    25674
    22717.5

    2012
    96525
    62045
    34480
    13792
    20688
    G

    2009
    95880
    57685.156
    38194.844
    15277.938
    22916.906

    AVERAGE COST
    2010
    2011
    110110.00 105462.50
    66246.05 66513.09
    43863.952 38949.409
    17545.581 15579.764
    26318.371 23369.645

    LD USE FIFO METHOD.


    LL USE LIFO TO MAXIMIZE PROFIT PROVIDED STOCKS ARE NOT OF PERISHABLE NATURE.

    COST

    URE.

    2012
    96525
    63293.839
    33231.161
    13292.464
    19938.696

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