case 3 the kroger company

Case 3: The Kroger Company

The Kroger Company reported the following data in its annual report (in millions).

January 31, 2015 February 1, 2014 February 2, 2013
Net sales $108,465 $98,375 $96,619
Cost of sales (using LIFO)  85,512 78,138 76,726
Year-end inventories using FIFO   6,933  6,801  6,244
Year-end inventories using LIFO   5,688  5,651  5,146

(a1Compute Kroger’s inventory turnovers for fiscal years ending January 31, 2015, and February 1, 2014, using:

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(1)Cost of sales and LIFO inventory.

(2)Cost of sales and FIFO inventory.

(b)   Some firms calculate inventory turnover using sales rather than cost of goods sold in the numerator. Calculate Kroger’s fiscal years ending January 31, 2015, and February 1, 2014, turnover, using:

(1)Sales and LIFO inventory.

(2)Sales and FIFO inventory.

(c)   State which method you would choose to evaluate Kroger’s performance. Justify your choice.

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