[ericarae1]

In its first month of operation, Marquette Company purchased 100 units of inventory for $9, then 200 units for $8, and finally 150 units for $8. At the end of the month, 200 units remained. Compute the amount of phantom profit that would result if the company used FIFO rather than LIFO.

The company uses the periodic inventory system.

Phantom Profit $

[isranin]

1300?

[CaptainForest]

Purchase 100 x 9
Purchase 200 x 8
Purchase 150 x 8

End of Month 200 left

Therefore, used up 250 units

FIFO system, COGS would be:
100 x 9 + 150 x 8 = 2,100

LIFO system, COGS would be:
150 x 8 + 100 x 8 = 2,000

Therefore, FIFO results in $100 of extra costs, and therefore $100 less profit than LIFO