Page 13 - FINAL CFA I SLIDES JUNE 2019 DAY 8
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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);
• EBIT higher by $860.
Higher profit unsustainable because
Big 4 will eventually run out of
inventory (only left with 120).
