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Lubov Fominskaja [6]
3 years ago
6

FIFO and LIFO Costs Under Perpetual Inventory SystemThe following units of a particular item were available for sale during the

year:Inventory | 36 units @ $400Sale | 24 units @ $1,000First Purchase | 80 units @ $420Sale | 60 units @ 1,000Second Purchase | 75 units @ $440Sale | 55 units @ $1,000The firm uses the perpetual inventory system, and there are 52 units of the item on hand at the end of the year.
a. What is the total cost of the ending inventory according to FIFO?b. What is the total cost of the ending inventory according to LIFO?
Business
1 answer:
Sidana [21]3 years ago
5 0

Answer:

FIFO - $22,880

LIFO - $21,120

Explanation:

The FIFO inventory system means first in, first out. It means the initial inventory is the first to be sold. The ending inventory would consist of the last purchased inventory.

Ending inventory = 52 ×$440 = $22,880.

The LIFO inventory system means last in, first out. It means the last purchased inventory are the first to be sold . The ending inventory would consist of the initial inventories.

Ending inventory = (36 units × $400) + [(52-36) × 420] =$14,400 + $6,720 = $21,120

I hope my answer helps you

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Answer:

The firm's optimal capital structure is 80% Debt and 20% Equity.

The WACC at this optimal capital structure is 10.28%.

Explanation:

Note: See the attached excel file the computation of the weighted average cost of capital (WACC) at the optimal capital structure. Also note that the data in the question are merged together but they are sorted in the attached excel file before answering the question.

The optimal capital structure of a firm can be described as a combination of debt and equity financing that is the beat in which market value of the firm is maximized while its cost of capital is minimized.

Using the weighted average cost of capital (WACC), the optimal capital cost capital structure occurs at a point where the WACC is the lowest.

From the attached excel file, the lowest WACC is 0.1028, or 10.28%.  At this firm Market Debt- to-Value Ratio (wd) which is debt is 0.80 (i.e. 80%), and Market Equity-to-Value Ratio (ws) which is equity is 0.20 (i.e. 20%).

Therefore, the firm's optimal capital structure is 80% Debt and 20% Equity.

The WACC at this optimal capital structure is 10.28%.

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2 years ago
There is a flexible exchange rate system and only two countries in the world, the United States and Mexico. If the inflation rat
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Answer: The correct answer is "a. the dollar will depreciate and the peso will appreciate.".

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As inflation in the United States is higher, the dollar is affected by a loss of purchasing power, therefore it depreciates with respect to the Mexican peso.

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Answer:

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