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    Gross Profit and Ending Inventory FIFO and LIFO

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    Converse Supplies produces a product with the following costs as of July 1, 2009.

    Material $6
    Labor $4
    Overhead $2

    Beginning inventory at these costs on 1 July was 5,000 units. From 1 July to 1 December, Converse produced 15,000 units. These units had a material cost of $10 per unit. The costs for labor and overhead were the same. Converse uses FIFO inventory accounting. Assuming that converse sold 17,000 units during the last 6 months of the year at $20, what would gross profit be? What is the value of ending inventory?

    How about if Converse used LIFO accounting instead? What would its gross profit be? What is the value of its ending inventory?

    Show all work and explain.

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    Solution Preview

    ** Please see the attached file for the complete solution response **

    Units Cost Per unit
    Beginning inventory 5,000 $60,000 $12
    Production during the period 15,000 $240,000 $16
    20,000 300,000

    FIFO Inventory valuation

    Gross profit
    Sales 17,000 $340,000
    Less: Cost ...

    Solution Summary

    This solution provides a detailed a computation of the given accounting problem.