Answer:
The First-in, First-out has the lower cost of goods sold, therefore, it will provide with a higher gross profit.
Explanation:
Giving the following information:
June 1: 144 units for $1000 ($6.94 per unit)
June 10: 192 units for $1500 ($7.81 per unit)
June 15: 192 units for $1610 ($8.38 per unit)
June 28: 144 units for $1270 ($8.82 per unit)
Ending inventory in units= 200 units on hand.
The method that will provide a higher gross profit is the one with the lower cost of goods sold.
Inventory methods:
<u>FIFO (first-in, first-out):</u>
COGS= 144*6.94 + 192*7.81 + 136*8.38= $3,639
<u>LIFO (last-in, lsdt-out)</u>
COGS= 144*8.82 + 192*8.38 + 136*7.81= $3,941
<u>Weighted-average:</u>
Average price= (6.94 + 7.81 + 8.38 + 8.82)/4= $7.99
Now, we can calculate the cost of goods sold:
COGS= 7.99*472= $3,771.28
<u>The First-in, First-out has the lower cost of goods sold, therefore, it will provide with a higher gross profit.</u>
