 # Help: Vol. 3, SS 9, Reading 35, Practice Prob #4

I’m working through this chapter that covers LIFO vs FIFO and converting between the two. I’m a little stuck on problem #4. It says in the problem that 70% of Zenab’s inventory is calculated under LIFO; 30% is under FIFO. So the question is, how do we get Zenab to 100% LIFO? In other words, how do we get COGS to reflected 100% LIFO, as the ratios in the appendix (pp A-17 and pp A-18) indicate. And why can’t we compute inventory at 100% LIFO? Also, with converting Faybech to LIFO, I know that COGS(LIFO) = COGS(FIFO) + BI x r r is calculated as LIFO Effect/BI. So how did we get the figures in p A-18 for Faybech? I’m typing this right now at a college library. I’ll probably have more questions about this when I get home. Volume 3–and particularly the current study sessions and readings–is definitely a time consuming reading. While the concepts are familiar, disassembling the ideas and putting the pieces back together takes a lot of time.

May anyone help?

Hi, gdiddy. The solution presented in the Appendix masks many arduous and lengthy intermediate steps. I was able to recalculate all of the the numbers presented in the solution, but will need have more specifics in terms of which numbers in the solution you are trying to recalculate. It would be efficient if you could specificy, for example, 4A(ii) and let me know the number in the solution you are trying to calculate. Thank you.

Two things I’m trying to figure out: How did the appendix arrive at the ratios at the bottom of page A-17? Specifically, how did we convert Zenab’s COGS from 70%LIFO/30%FIFO to 100% FIFO to arrive at gross margin of 0.332 and pretax income/sales of 0.047? I’ve tried numerous calculations but cannot come up with the ratios given on 4©(ii). Furthermore, how did the book arrive at Faybech’s COGS of 53,675 after converting from FIFO to LIFO (top of A-18, 4©(ii)? I thought when convertin from FIFO to LIFO COGS, we need to add the product of beginning inventory and rate of increase in prices to FIFO COGS. What were the inputs to calculate 53,675? Thanks.