The Churchill Corporation uses a periodic inventory system and the LIFO inventor
ID: 2444452 • Letter: T
Question
The Churchill Corporation uses a periodic inventory system and the LIFO inventory cost method for its one product. Beginning inventory of 21,000 units consisted of the following, listed in chronological order of acquisition:
During 2016, inventory quantity declined by 11,000 units. All units purchased during 2016 cost $10.00 per unit.
Calculate the before-tax LIFO liquidation profit or loss that the company would report in a disclosure note assuming the amount determined is material.
12,500 units at a cost of $6.00 per unit = $75,000 8,500 units at a cost of $7.00 per unit = 59,500Explanation / Answer
Maintenance
Accounting
Dept
Dept
Dept A
Dept B
Total
Maintenance
Accounting
Dept
Dept
Dept A
Dept B
Total
a.
Maintaenance Dept Cost
300000
Machine hours:
Dept A
2300
Dept B
200
Total Hours
2500
Cost Allocation to Dept A
= 300000 * 2300/2500
= $276,000
b.
Accounting Dept Cost
120000
Employees
Dept A
8
Dept B
4
Total Employees
12
Cost allocation to Dept B
= 120000*4/12
= $40000
c.
Maintaenance Dept Cost
300000
Machine hours:
Accounting Dept
20
Dept A
2300
Dept B
200
Total Hours
2520
Cost Allocation to dept B
= 300000 * 200/2520
= $23,810
Costs Allocation under Direct Methode:Maintenance
Accounting
Dept
Dept
Dept A
Dept B
Total
Departments costs 300000 120000 300000 500000 1220000 Allocation: Maintenance Dept 23/25 & 2/25 -300000 276000 24000 Accounts Dept 8/12 & 4/12 -120000 80000 40000 Total Costs Allocation: 0 0 656000 564000 1220000