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|
|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.