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- 1. LIFO Costing Model
LIFO Costing Model Units 2007 Cost
Beginning Inventory 15,000 900 13,500,000
Purchases,Q1 10,000 1,000 10,000,000
Purchases,Q2 10,000 1,100 11,000,000
Purchases,Q3 10,000 1,200 12,000,000
Purchases,Q4 10,000 1,300 13,000,000
Available for Sales 55,000 59,500,000
Less Sale 40,000 46,000,000
Ending Inventory 15,000 $13,500,000
FIFO Costing Model
Units 2008 Cost
Beginning Inventory 15,000 900 13,500,000
Purchases,Q1 10,000 1,400 14,000,000
Purchases,Q2 10,000 1,500 15,000,000
Purchases,Q3 10,000 1,600 16,000,000
Purchases,Q4 10,000 1,700 17,000,000
Available for Sales 55,000 75,500,000
Less Sale 40,000 50,500,000
Ending Inventory 15,000 $25,000,000
Income Statement 2007 - LIFO 2008 - FIFO 2008 - LIFO 2009 - FIFO
Sales $67,000,000 $70,350,000 $70,350,000 $73,867,500
Cost of Goods Sold $46,000,000 $50,500,000 $62,000,000 $72,000,000
Gross Margin $21,000,000 $19,850,000 $8,350,000 $1,867,500
Selling and admin exp. $10,000,000 $10,000,000 $10,000,000 $10,000,000
Income before taxes $11,000,000 $9,850,000 -$1,650,000 -$8,132,500
Income tax(35%) $3,850,000 $3,447,500 $0 $0
Net Income $7,150,000 $6,402,500 -$1,650,000 -$8,132,500
Profitabilty Margin 10.67 9.10 (2.35) (11.01)
Income Statement 2007 - LIFO 2008 - FIFO 2009 - FIFO 2009 - FIFO**
Sales $67,000,000 $70,350,000 $73,867,500 $73,867,500
Cost of Goods Sold $46,000,000 $50,500,000 $72,000,000 $63,750,000
Gross Margin $21,000,000 $19,850,000 $1,867,500 $10,117,500
Selling and admin exp. $10,000,000 $10,000,000 $10,000,000 $10,000,000
Income before taxes $11,000,000 $9,850,000 -$8,132,500 $117,500
Income tax(35%) $3,850,000 $3,447,500 $0 $41,125
- 2. Net Income $7,150,000 $6,402,500 -$8,132,500 $76,375
Profitabilty Margin 10.67 9.10 (11.01) 0.10
- 3. ASSUMPTIONS
Units 2008 Cost
15,000 900 13,500,000
10,000 1,400 14,000,000
10,000 1,500 15,000,000
10,000 1,600 16,000,000
10,000 1,700 17,000,000
55,000 75,500,000
40,000 62,000,000
15,000 $13,500,000
FIFO Costing Model
Units 2009 Cost
5,000 1,600 8,000,000
10,000 1,700 17,000,000
10,000 1,800 18,000,000
10,000 1,900 19,000,000
10,000 2,000 20,000,000
10,000 2,100 21,000,000
55,000 103,000,000
40,000 72,000,000
15,000 $31,000,000
2009 - FIFO** 2009 LIFO
$73,867,500 $73,867,500
$63,750,000 $78,000,000 15
$10,117,500 -$4,132,500
$10,000,000 $10,000,000 10
$117,500 -$14,132,500
$41,125 $0 5
$76,375 -$14,132,500
0
0.10 (19.13) -5
-10
-15
- 5. Sales Price
Increment 5.00
Income Tax 35%
Selling and
Adminstrativ
e Increase 30%
Units 2009 Cost
15,000 900 13,500,000
10,000 1,800 18,000,000
10,000 1,900 19,000,000
10,000 2,000 20,000,000
10,000 2,100 21,000,000
55,000 91,500,000
40,000 78,000,000
15,000 $13,500,000
FIFO Costing Model Decreasing Costs
Units 2009 Cost
5,000 1,600 8,000,000
10,000 1,700 17,000,000
10,000 1,550 15,500,000
10,000 1,550 15,500,000
10,000 1,550 15,500,000
10,000 1,550 15,500,000
55,000 87,000,000
40,000 63,750,000
15,000 $23,250,000
Profitability Margin
2007 LIFO 2008 FIFO 2009 FIFO
- 8. FIFO Costing Model LIFO FIFO FIFO
Units 2007 Cost Units 2008 Cost Units 2009
Beginning Inventory 15,000 900 13,500,000 15,000 900 13,500,000 5,000 1,600
10,000 1,700
Purchases,Q1 10,000 1,000 10,000,000 10,000 1,400 14,000,000 10,000 1,800
Purchases,Q2 10,000 1,100 11,000,000 10,000 1,500 15,000,000 10,000 1,900
Purchases,Q3 10,000 1,200 12,000,000 10,000 1,600 16,000,000 10,000 2,000
Purchases,Q4 10,000 1,300 13,000,000 10,000 1,700 17,000,000 10,000 2,100
Available for Sales 55,000 59,500,000 55,000 75,500,000 55,000
Less Sale 40,000 46,000,000 40,000 50,500,000 40,000
Ending Inventory 15,000 $13,500,000 15,000 $25,000,000 15,000
Units 2009 Cost
5,000 1,600 8,000,000
10,000 1,700 17,000,000
10,000 1,550 15,500,000
10,000 1,550 15,500,000
10,000 1,550 15,500,000
10,000 1,550 15,500,000
55,000 87,000,000
40,000 63,750,000
15,000 $23,250,000
- 9. FIFO FIFO **
Cost Units 2009 Cost
8,000,000 5,000 1,600 8,000,000
17,000,000 10,000 1,700 17,000,000
18,000,000 10,000 1,550 15,500,000
19,000,000 10,000 1,550 15,500,000
20,000,000 10,000 1,550 15,500,000
21,000,000 10,000 1,550 15,500,000
103,000,000 55,000 87,000,000
72,000,000 40,000 63,750,000
$31,000,000 15,000 $23,250,000