Answer:
If the company uses FIFO, the gross income will increase by $500.
Explanation:
Giving the following information:
Purchases:
230 units of inventory for $9
330 units for $10
270 units for $11
At the end of the month, 310 units remained.
<u>The difference in gross profit is in the cost of goods sold. First, we will determine the number of units sold:</u>
<u></u>
Units sold= total units - ending inventory
Units sold= 830 - 310
Units sold= 520
<u>The FIFO method uses the cost of the firsts units incorporated into inventory. The LIFO method uses the cost of the lasts units incorporated into inventory.</u>
FIFO:
COGS= 230*9 + 290*10= $4,970
LIFO:
COGS= 270*11 + 250*10= $5,470
Difference= 5,470 - 4,970= $500
If the company uses FIFO, the gross income will increase by $500.
