The following accounting information pertains to Boardwalk Taffy and Beach Sweets. The only difference between the two companies is that Boardwalk Taffy uses FIFO, while Beach Sweets uses LIFO.

Required
a. Compute the gross margin percentage for each company and identify the company that appears to be charging the higher prices in relation to its cost.
b. For each company, compute the inventory turnover ratio and the average days to sell inventory. Identify the company that appears to be incurring the higher financing cost.
c. Explain why a company with the lower gross margin percentage needs to have a higher inventory turnover ratio assuming a period of inflation.

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Boardwalk Taffy Beach Sweets $ 120,000 480,000 $ 120,000 480,000 Cash Accounts receivable Merchandise inventory Accounts payable Cost of goods sold Building Sales 350,000 300,000 360,000 2,000,000 500,000 2,050,000 3,000,000 3,000,000