In its first month of operation, Ivanhoe Company purchased 320 units of inventory for $5, then 420 units for $6, and finally 360 units for $7. At the end of the month, 400 units remained. The company uses the periodic method. Compute the amount of phantom profit that would result if the company use FIFO rather than LIFO.

If the company uses FIFO method, the cost of goods sold is lower increasing the gross profit. In this case, income will increase by $680.

Explanation:

Giving the following information:

purchases:

320 units of inventory for $5

420 units for $6

360 units for $7

At the end of the month, 400 units remained.

First, we need to determine the number of units sold:

Units sold= total units - ending inventory

Units sold= 1,100 - 400= 700

Now, we calculate the cost of goods sold using LIFO (last-in, first-out) and FIFO (first-in, first-out)

LIFO:

COGS= 360*7 + 340*6= $4,560

FIFO:

COGS= 320*5 + 380*6= $3,880

Finally, the difference:

Difference= 4,560 - 3,880= $680

If the company uses FIFO method, the cost of goods sold is lower increasing the gross profit. In this case, income will increase by $680.

in 2001, dell computer became the world’s largest personal computer vendor, continuing to

gain market share and post profits in an industry struggling with slumping sales and billions of

dollars in losses. dell sells 90% of its pcs directly to the final customer, largely bypassing the

reseller channel that accounts for most of the world’s pc sales. this direct customer relationship

is the key to dell’s business model, and provides distinct advantages over the indirect sales

model. dell’s direct relationship with the customer allows it to tailor its offerings to customer

needs, offer add-on products and services, and use the internet to offer a variety of customer

services. in addition, dell’s pcs are built to customers’ specifications upon receipt of an order,

giving dell additional advantages over indirect pc vendors who must try to forecast demand and

ship products based on those forecasts. dell’s direct sales and build-to-order model has achieved

superior performance in the pc industry in terms of inventory turnover, reduced overhead, cash

conversion, and return on investment (kraemer, et al., 2000).

explanation:

this conflict is person vs. society

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hope this ! < 3