During its first year of operation, Krabna Company purchased 5,600 units of a product at $42 per unit. During the second year, it purchased 6,000 units of the same product at $48 per unit. During the third year, it purchased 5,000 units at $60 per unit. Krabna Company managed to have an ending inventory each year of 1,000 units. The company uses the periodic inventory system.

Prepare cost of goods sold statements that compare the value of ending inventory and the cost of goods sold for each of the three years using (1)

the FIFO inventory costing method and (2) the LIFO method. From the resulting data, what conclusions can you draw about the relationships between the changes in unit price and the changes in the value of ending inventory?

Periodic Inventory System and Inventory Costing Methods