White Corporation Uses the FIFO Method for Internal Reporting Purposes

question 39

Multiple Choice

White Corporation uses the FIFO method for internal reporting purposes and LIFO for external reporting purposes.The balance in the LIFO Reserve account at the end of 2010 was $80,000.The balance in the same account at the end of 2011 is $120,000.White's Cost of Goods Sold account has a balance of $600,000 from sales transactions recorded during the year.What amount should White report as Cost of Goods Sold in the 2011 income statement?

• A)$560,000.
• B)$600,000.
• C)$640,000.
• D)$720,000.

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Definitions:

High-low Method

A technique used in cost accounting to estimate fixed and variable costs based on the highest and lowest levels of activity.

Net Operating Income

The net profit of a business is calculated by deducting operating expenses from the gross profit and before accounting for interest and taxes.

Sales Volume

The number of units sold within a reporting period, used as a measure of business activity.

Margin of Safety

The difference between actual sales and the break-even point, indicating how much sales can drop before a company incurs a loss.