Question
UVW Ltd. uses the LIFO method for inventory costing. For the fiscal year ended December 31, 2023, the following information is available: Beginning Inventory: 1,500
UVW Ltd. uses the LIFO method for inventory costing. For the fiscal year ended December 31, 2023, the following information is available:
- Beginning Inventory: 1,500 units at $20 per unit
- Purchases:
- April 1: 2,000 units at $22 per unit
- September 1: 2,500 units at $24 per unit
- Sales:
- 5,000 units sold during the year
- Ending Inventory: 1,000 units
a. Calculate the cost of goods sold (COGS) using the LIFO method. b. Determine the value of ending inventory using the LIFO method. c. Analyze UVW Ltd.’s financial ratios (such as current ratio, quick ratio) under the LIFO method. d. Discuss the impact of using LIFO on UVW Ltd.’s profitability margins (gross profit margin, net profit margin). e. Evaluate the strategic implications for UVW Ltd. if they were to switch from LIFO to FIFO. f. Recommend inventory management strategies based on UVW Ltd.’s financial performance metrics and industry benchmarks.
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