Answer:
See below.
Explanation:
1)
Calculating cost of goods sold by assuming periodic average.
Total cost of inventory at the beginning of 2018 = 10,000 * 7 = $70,000
Total Cost of inventory purchased during the year = 50000*8.50 = $425,000
Avg cost of inventory = 70,000 + 425,000 / 60,000 = $8.25/unit
Cost of goods sold hence, 54000*8.25 = $445,500
2)
The effect of LIFO is as follows,
Assuming out of the 54000 sales 50,000 were @ $8.50 and 4000 @ $7
so cost of goods sold then would be = $453,000
This means that LIFO will cause a negative effect of $7500 and reduce income by this amount.
Hope that helps.
