Question: BE6-5 In its first month of operation, Hoffman Company purchased 100 units of inventory for $6, then 200 units for $7, and finally 140 units for $8. At the end of the month, 180 units remained. Compute the amount of phantom profit that would result if the company used FIFO rather than LIFO.
Explain why this amount is referred to as phantom profit. The company uses the periodic method. Identify the impact of LIFO versus FIFO.