Max Company's First Year in Operation Was Year 1 In December Year 1, Max Sold 350 Units for $480

question 35

Essay

Max Company's first year in operation was Year 1. The following inventory purchase information comes from Max's accounting records for the year.
$\begin{array}{ll}\text { 19-January } & 120 \text { units } @\$ 280 \\20-\text { April } & 240 \text { units }@ \$ 304\\\text { 15-October }&90 \text { units }@\$320\end{array}$
In December Year 1, Max sold 350 units for $480 each. Operating expenses for the year were $30,000, and the tax rate was 30%.
Required:Calculate the cost of goods sold by LIFO and by FIFO.What amount of income tax would Max have to pay if it uses LIFO? If it uses FIFO?Assuming that the results for Year 1 are representative of what Max can generally expect, would you recommend that the company use LIFO or FIFO? Explain.

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Definitions:

Long Run

A period in which all factors of production and costs can be varied, and all market adjustments have been made.

Per Capita GDP Growth

The rate of growth of the Gross Domestic Product (GDP) per person in a specific area, commonly used to indicate economic health and living standards.

Labor Productivity Growth

An increase in the amount of goods and services produced per hour worked by employees, which is a key determinant of economic growth and competitiveness.

Labor-Capital Ratio

The ratio of labor inputs to capital inputs in production, reflecting the relationship between the workforce and machinery or capital assets.