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22 February, 23:53

The following three identical units of Item P401C are purchased during April:

Item Beta Units Cost

April 2 Purchase 1 $100

15 Purchase 1 120

20 Purchase 1 140

Total 3 $360

Average cost per unit $120 ($360 : 3 units)

Assume that one unit is sold on April 27 for $300.

Determine the gross profit for April and ending inventory on April 30 using the (a) first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) weighted average cost method.

Gross Profit Ending Inventory

a. First-in, first-out (FIFO) $ $

b. Last-in, first-out (LIFO) $ $

c. Weighted average cost $

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Answers (1)
  1. 23 February, 00:17
    0
    a. Gross Profit = $200 and Ending Inventory = $280

    b. Gross Profit = $160 and Ending Inventory = $220

    c. Gross Profit = $180 and Ending Inventory = $240

    Explanation:

    FIFO

    FIFO method assumes that the first goods received by the business will be the first ones to be delivered to the final customer.

    Gross Profit

    Sales (1 * $300) $300

    Less Cost of Sales (1 * $100) ($100)

    Gross Profit $200

    Inventory = Units left * earliest price

    = 2 * $140

    = $280

    LIFO

    LIFO method assumes that the last goods purchased are the first ones to be issued to the final customer.

    Gross Profit

    Sales (1 * $300) $300

    Less Cost of Sales (1 * $140) ($140)

    Gross Profit $160

    Inventory : (1 * $100 + 1 * $120) = $220

    Weighted Average Cost (AVCO)

    The average cost of goods held is recalculated each time a new delivery of goods is received. Issues are then priced at this weighted average cost.

    Gross Profit

    Sales (1 * $300) $300

    Less Cost of Sales (1 * $120) ($120)

    Gross Profit $180

    Inventory = Units left * average price

    = 2 * $120

    = $240
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