Question

Boston Cycles started October with 12 bicycles that cost $42 each. On October 16, Boston bought 40 bicycles at $68 each. On October 31, when the average cost per unit was $62.00​, Boston sold 34 bicycles for $100 each. Boston​'s cost of goods sold under the​ FIFO, LIFO and​ weighted-average methods is summarized as​ follows: FIFO LIFO Weighted-average bicy Cost of Goods Sold $2,000 $ 2,312 $ 2,108 Which inventory costing method produced the lowest cost of goods sold?

Answer 1

Answer:

FIFO method of inventory valuation produced the lowest of goods sold at $2000

Explanation:

The implication of FIFO producing the lowest costs of good sold is that profit under FIFO method will be much higher since a lower costs of good sold is deducted from sales revenue to arrive at gross profit for the period

In addition, higher gross profit is also a pointer to higher net income and higher tax expense overall.

In order to manage tax exposure effectively,the LIFO method of valuation would be the best  option as it has the highest costs of good sold,hence lower profit figure and lower tax liability