Answer:
1. Ending inventory = $2,408; Cost of goods sold = $16,837; Sales revenue = $22,770; and Gross profit = $5,933.
2. Ending inventory = $2,094; Cost of goods sold = $17,151; Sales revenue = $22,770; and Gross profit = $5,619.
3. Ending inventory = $2,293; Cost of goods sold = $16,952; Sales revenue = $22,770; and Gross profit = $5,818.
Explanation:
Note: This question is not complete. The complete question is therefore presented before answering the question. See the attached pdf file for the complete question.
Explanation to the answer is now presented as follows:
1. Using FIFO, calculate ending inventory, cost of goods sold, sales revenue, and gross profit.
Note: See part 1 of the attached excel for the calculation of calculation of Cost of goods available for sale, Cost of goods sold, and Ending inventory using FIFO.
First In, First Out (FIFO) refers to an inventory accounting method in which inventory items purchased first are sold first, while the one that are purchased last are sold last.
In the attached excel file, since the inventory purchased on Oct. 6 is purchased last, the number of unit of inventory purchased on Oct. 6 sold is calculated by deducting the sum of the beginning inventory and inventory purchased before Oct. 6 from the total inventory sold as follows:
Number of unit of inventory purchased on Oct. 6 that are sold = Number of units sold - (Beginning inventory + Apr. 7 Purchases + Jul. 16 Purchases) = 414 - (45 + 125 + 195) = 49
Therefore, the number of ending inventory is obtained as follows:
Number of unit of ending inventory = Number of inventory purchased on Oct. 6 - Number of inventory purchased on Oct. 6 sold = 105 – 49 = 56
Sales revenue = Number of unit units of inventory sold for the entire year * Selling price per unit = 414 * $55 = $22,770
From the attached excel file, we have:
Cost of goods sold = $16,837
Ending inventory = $2,408
Therefore, we have:
Gross profit = Sales revenue - Cost of goods sold = $22,770 - $16,837 = $5,933
2. Using LIFO, calculate ending inventory, cost of goods sold, sales revenue, and gross profit.
Note: See part 2 of the attached excel for the calculation of calculation of Cost of goods available for sale, Cost of goods sold, and Ending inventory using LIFO.
Last In, First Out (LIFO) refers to an inventory accounting method in which inventory items purchased last are sold first, while the one that are purchased first are sold last.
In the attached excel file, the number of unit of inventory purchased on April 7 that are sold and the ones remaining that are NOT sold that forms part of ending inventory are calculated as follows:
Number of unit of inventory purchased on April 7 that are sold = 414 – (195 + 105) = 114
Number of unit of inventory purchased on April 7 that are NOT sold = Number of unit of inventory purchased on April 7 - Number of unit of inventory purchased on April 7 that are sold = 125 – 114 = 11
Sales revenue = Number of unit units of inventory sold for the entire year * Selling price per unit = 414 * $55 = $22,770
From the attached excel file, we have:
Cost of goods sold = $17,151
Ending inventory = $2,094
Therefore, we have:
Gross profit = Sales revenue - Cost of goods sold = $22,770 - $17,151 = $5,619
3. Using weighted average cost, calculate ending inventory, cost of goods sold, sales revenue, and gross profit. (Round "Average Cost per unit" to 4 decimal places and all other answers to the nearest whole number.)
Note: See part 3 of the attached excel for the calculation of calculation of Cost of goods available for sale, Cost of goods sold, and Ending inventory using weighted average cost.
Weighted average cost method refers to a method of costing inventory in which the total cost of the goods available for sale is divided by the total number of units available for sales in order to obtain weighted average cost per unit.
In the attached excel file, weighted average cost per unit is therefore calculated and rounded to 4 decimal places as follows:
Weighted average cost per unit = $19,245 / 470 = $40.9468
Number of unit of ending inventory = Total number of units available for sales – Number of unit sold = 470 – 414 = 56
Sales revenue = Number of unit units of inventory sold for the entire year * Selling price per unit = 414 * $55 = $22,770
From the attached excel file, we have:
Cost of goods sold = $16,952
Ending inventory = $2,293
Therefore, we have:
Gross profit = Sales revenue - Cost of goods sold = $22,770 - $16,952 = $5,818
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