Merrimack Case Study Essay
Assumptions: Following assumptions are made for projecting income in 2008:
• No drop in sales for 2008.
• Selling and administrative expenses remain constant.
• Increase in sales price by 15% as inventory price increased by more than 30% on average.
Considering the following assumptions we calculate the income with LIFO and FIFO method.
Inventory:
Inventory 2007 2008 Units Per Unit Cost in $’000 Units Per Unit Cost in $’000 Beginning Inventory 15000 900 13500 15000 900 13500
Purchases, Q1 10000 1000 10000 10000 1400 14000
Purchases, Q2 10000 1100 11000 10000 1500 15000
Purchases, Q3 10000 1200 12000 10000 1600 16000
Purchases, Q4 10000 1300 13000 10000 1700 17000
Available for Sale 55000 59500 55000 75500
• No drop in sales for 2008.
• Selling and administrative expenses remain constant.
• Increase in sales price by 15% as inventory price increased by more than 30% on average.
Considering the following assumptions we calculate the income with LIFO and FIFO method.
Inventory:
Inventory 2007 2008 Units Per Unit Cost in $’000 Units Per Unit Cost in $’000 Beginning Inventory 15000 900 13500 15000 900 13500
Purchases, Q1 10000 1000 10000 10000 1400 14000
Purchases, Q2 10000 1100 11000 10000 1500 15000
Purchases, Q3 10000 1200 12000 10000 1600 16000
Purchases, Q4 10000 1300 13000 10000 1700 17000
Available for Sale 55000 59500 55000 75500