Determine the difference in the amount of income that the company would have reported if it had used the FIFO method instead of the LIFO method. Would income have been greater or less?

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Cody Daffinson · Accepted Answer

Final Answer :  1. FIFO: Ending inventory   $ 3 , 660 \$ 3,660 $3 , 660 300  units  @ $ 8 = $ 2 , 400 180  units  @ $ 7 480  units  = 1 , 260 $ 3 , 660 \begin{array}{lll}300 	ext { units } @ \$ 8  &  =  &  \$ 2,400 \\frac{180 	ext { units } @ \$ 7}{480 	ext { units }}  &  =  &  \frac{1,260}{\$ 3,660}\end{array} 300  units  @$8 480  units  180  units  @$7 ​ ​ = = ​ $2 , 400 $3 , 660 1 , 260 ​ ​ 2. Average Cost: Ending inventory   $ 3 , 216 \$ 3,216 $3 , 216 $ 6 , 700 ÷ 1 , 000 = $ 6.70 \$ 6,700 \div 1,000 = \$ 6.70 $6 , 700 ÷ 1 , 000 = $6.70   per unit   × 480 	imes 480 × 480   units   = $ 3.216 ‾ ‾ = \underline { \underline { \$ 3.216 } } = $3.216 ​ ​   Income would have been $880 ($3920 vs. $3040) greater if the company used FIFO instead of LIFO.

Determine the difference in the amount of income that the company would have reported if it had used the FIFO method instead of the LIFO method. Would income have been greater or less?

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