unit

unit cost CGSs

FIFO
January 6,000 2 12,000
10,300 2 20,600
22,100 2.1 46,410
38,400 79,010
Februrary 7,200 2.1 15,120
28,200 2.2 62,040
5,300 2.6 13,780
40,700 90,940
LIFO
January 29,300 2.1 61,530
9,100 2 18,200
38,400 79,730
Februrary 15,300 2.6 39,780
25,400 2.2 55,880
40,700 95660
Weighted-average
January 38,400 2.06 79,104
Februrary 40,700 2.3 93610

FIFO LIFO Weighted-average

total CGSs for two

period 169,950 175,390 172,714

Gross proffit 130,050 124,610 127,286

FIFO method has the highest profit among all.Therefore FIFO is preferable in
times of rising prices, when costs recorded are low and income is high. But, LIFO
is preferable in economic climates when tax rates are high because the costs
assigned will be higher and income is much lower.
Revenue for 2 months
300000
1

1 d
2 c
 2016 2015 2014
Revenue Compute the gross pro
goods 59,074 56,223 53,417
and 2016.
sold
Gross 38,504 36,665 34,941 Compute the days inve
and 2016
profit 20,570 19,558 18,476 Please Compute the ca
s improvement in inven
receivab
le
Inventor 0 0 0
ys 9,458 8,911 9,127
payable 5,633 5,124 5,008

1.Gross profit margin

Financial year Gross profit Revenue 1.Gross profit margin
2016 20570 59074 34.8%
2015 19558 56223 34.8%
2014 18476 53417 34.6%

2.Days inventory outstanding

Inventory cost of goods sold DIO
2016 9458 38504 365 89.66
2015 8911 36665 365 88.71

3.Days payable outstanding

Accounts payable No of days cost of goods sold DPO
2016 5633 365 38504 53.40
2015 5124 365 36665 51.01

4. Cash conversion cycle

2016 36.2
 2015 38

5.cash saving
2016 2015 changes Sales (COGS per day
DIO 89.66 88.71 -0.95 105.5
DPO 53.40 51.01 2.39 105.5
CCC 36.2 38
mpute the gross profit margin for 2014, 2015,
2016.
mpute the days inventory outstanding for 2015
2016
ase Compute the cash saving in 2016 due to the
provement in inventory management.
cash saving
-100.225
252.145
151.92