Question

Under the last-in, first-out (LIFO) inventory valuation method, a price index for inventory must be established for tax purposes.
The quantity weights are based on year-ending inventory levels.

Ending Unit Price ($)
Product Inventory Beginning Ending
A 500 0.15 0.21
B 50 1.60 1.80
C 100 4.50 4.20
D 40 12.00 13.40

Use the beginning-of-the-year price per unit as the base-period price and develop a weighted aggregate index for the total inventory value at the end of the year. (Round your answer to the nearest integer.)

Answer 1

Answer:

The laspeyres method of weighted aggregate price index is used of LIFO inventory valuation, therefore laspeyres index number is 106.08

Step-by-step explanation:

First of all we would have to perform the following table:

                                             

Product   Ending Inventory(Q0)  Begining(P0)   Ending(P1)   P0×Q0   P1×Q0  

    A                    500                         0.15               0.21                75        105

    B                       50                         1.60               1.80                 80         90

    C                       100                        4.50             4.20                 450      420

    D                       40                          12.00          13.40                 480     536

                                                                                             Total  1085     1151

Therefore, using laspeyres index number, we calculate the following:

laspeyres index number=(∑P1×Q0/∑P0×Q0)×100

laspeyres index number=(1151/1085)×100

laspeyres index number=106.08