A New Textbook Is Published in the Spring of 2018

question 6

Essay

A new textbook is published in the spring of 2018.Your campus bookstore buys 400 copies at $70 each in June,an additional 1,000 copies in August at $72 each,and 600 copies in December at $75 each.At the end of December 2018,the bookstore has sold 1,900 copies of the text.
Find the cost of goods sold and the cost of ending inventory:
a)under the weighted average cost method.
b)under the FIFO method.
c)under the LIFO method.
Using your calculations as a guide,explain how different inventory costing methods affect the numerator and denominator of the inventory turnover ratio when unit costs are increasing.Conclude your explanation by identifying the method that produces the highest (and lowest)inventory turnover ratio.

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Definitions:

Net Income

The total earnings of a company after subtracting all expenses, taxes, and costs from total revenue.

Total Assets

The sum of all assets owned by a company, including both current and long-term assets.

Planning Horizon

The timeframe over which future projections or strategic plans are made and considered.

Financial Planning

The process of creating strategies for managing financial affairs to meet life goals, including budgeting, investing, and saving for the future.