WebUsing the FIFO cost flow assumption, the cost of the 2 units sold will be $22 ($10 + $12) Gross profit using LIFO: Sales of $32 - COGS $25 = $7. Gross profit using FIFO: Sales of $32 - COGS $22 = $10. Note that the LIFO gross profit is $3 less than the FIFO gross profit. To learn more, see the Related Topics listed below: WebAccounting questions and answers. Golf Challenge Corp. is a retail sports store carrying golf apparel and equipment. The store is at the end of its second year of operation and is …
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WebAug 28, 2024 · Xtractor Inc. uses LIFO to evaluate its inventory. The price of production inputs within the company’s industry has been decreasing for the last few years. To compare the gross profit of Xtractor with other companies reporting using FIFO, an analyst would need to: Add the amount of increase of the LIFO reserve to the cost of goods sold. WebOct 27, 2024 · This formula demonstrates that there are two ways to increase your level of profit: You can increase revenue or decrease costs (or pursue a combination of both). 1. Increase Revenue by Increasing Customers’ Willingness to Pay. Willingness to pay is the maximum amount a customer is willing to pay for a product or service. how to set up a pellet stove
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WebWhen they calculate the net profit using FIFO it will be higher than the LIFO method. Therefore, the net profit margin will increase. Since FIFO assumes that items are sold in the order they’re bought, the current ratio will increase. When they calculate the net profit using FIFO it will be higher than the LIFO method . WebThe FIFO and specific identification methods result in a more precise matching of historical cost with revenue. However, FIFO can give rise to paper profits, while specific … WebThe resulting gross margin is a better indicator of management’s ability to generate income than gross margin computed using FIFO, which may include substantial inventory (paper) profits. Supporters of FIFO argue that LIFO (1) matches the cost of goods not sold against revenues, (2) grossly understates inventory, and (3) permits income ... noteworthy dates