Question
Mannisto Inc. uses the FIFO inventory cost flow assumption. In a year of rising costs and prices, the firm reported net income of $289,414 and
Mannisto Inc. uses the FIFO inventory cost flow assumption. In a year of rising costs and prices, the firm reported net income of $289,414 and average assets of $1,487,380. If Mannisto had used the LIFO cost flow assumption in the same year, its cost of goods sold would have been $45,720 more than under FIFO, and its average assets would have been $37,800 less than under FIFO.
Required:
a.Calculate the firm's ROI under each cost flow assumption (FIFO and LIFO)
b.Suppose that two years later costs and prices were falling. Under FIFO, net income and average assets were $331,864 and $1,755,400, respectively. If LIFO had been used through the years, inventory values would have been $40,800 less than under FIFO, and current year cost of goods sold would have been $24,232 less than under FIFO. Calculate the firm's ROI under each cost flow assumption (FIFO and LIFO).
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