Lakshmi Ltd. uses the perpetual inventory system and reports the following inventory transactions for the month of June:

Instructions
(a) Determine the cost of goods sold and the cost of the ending inventory using
(1) FIFO and
(2) Average cost. Ignore the effect of income tax. (For average, use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.)
(b) Which cost method results in the higher cost of goods sold? Why?
(c) Which cost method results in the higher profit? Why?
(d) Which cost method results in the higher ending inventory? Why?
(e) Which cost method results in the higher cash flow? Why?

Transcribed Image Text:

Date Explanation Units Unit Cost Total Cost 150 230 (250) 450 150 (570) $ 750 1,380 June 1 Beginning inventory $5 12 Purchases 15 Sale 16 Purchases 23 Purchases 27 Sales 3,150 1,200