Page 18 - FINAL CFA I SLIDES JUNE 2019 DAY 8
P. 18
Session Unit 8:
28. Inventories
tanties
Big 4 reports inventory under LIFO. Due to a strike, no units were produced during 20X8. During
20X8, Big 4 sold 440 units. In the absence of the strike, Big 4 would have had a cost of $14 for
each unit produced. Compute the extra profit that resulted from the inventory liquidation.
Due to the LIFO liquidation,
COGS was lower by $860
($6,160 – $5,300); thus, pretax
profit was higher by $860. The
higher profit is unsustainable
because Big 4 will eventually
run out of inventory.
440*14
