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Homework answers / question archive / The Reuschel Company began 2018 with inventory of 10,000 units at a cost of $7 per unit
The Reuschel Company began 2018 with inventory of 10,000 units at a cost of $7 per unit. During 2018, 50,000 units were purchased for $8.50 each. Sales for the year totaled 54,000 units leaving 6,000 units on hand at the end of 2018. Reuschel uses a periodic inventory system and the LIFO inventory cost method.
Required:
1. Calculate the effect of the LIFO on the income.
The effect of the LIFO layer liquidation is to INCREASE income by ?????????
LIFO layer per unit= Current year cost per unit - Cost of inventory per unit of prior period
= 8.50- 7
= 1.50
Prior period unit= 54000- 50000
= 4000
So,
Effect of layer liquidation= 4000* 1.50
= 6000
