Impact on Profit of Failure to Replace LIFO Layers Harrison Lumber Company uses a periodic LIFO…


Question Description:

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Impact on Profit of Failure to Replace LIFO Layers Harrison Lumber Company uses a periodic LIFO method for inventory costing. The following information relates to the plywood inventory carried by Harrison Lumber. Plywood inventory: Date Quantity LIFO Costing Layers May 1 600 sheets 300 sheets at $800 225 sheets at $1100 75 sheets at $1300 Plywood purchases: May 8 115 sheets at $1400 17 95 sheets at $1500 29 200 sheets at $1450 All sales of plywood during May were at $20 per sheet. On May 31, there were 360 sheets of plywood in the storeroom. 1. Compute the gross profit on sales for May, as a dollar value and as a percentage of sales. 2. Assume that because of a lumber strike, Harrison Lumber is not able to purchase the May 29 order of lumber until June 10. Assuming sales remained the same, recomputed the gross profit on sales for May, as a dollar value and as a percentage of sales. 3. Compare the results of (1) and (2) and explain the difference.

Answer

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