Question

Hemming Co. reported the following current-year purchases and sales for its only product.
    

Date

Activities

Units Acquired at Cost

Units Sold at Retail

Jan.

1

Beginning inventory

220

units

@ $10.80

=

$

2,376

Jan.

10

Sales

190

units

@ $40.80

Mar.

14

Purchase

330

units

@ $15.80

=

5,214

Mar.

15

Sales

280

units

@ $40.80

July

30

Purchase

420

units

@ $20.80

=

8,736

Oct.

5

Sales

390

units

@ $40.80

Oct.

26

Purchase

120

units

@ $25.80

=

3,096

Totals

1,090

units

$

19,422

860

units

Required:
Hemming uses a periodic inventory system.
  
(a) Determine the costs assigned to ending inventory and to cost of goods sold using FIFO.

(b) Determine the costs assigned to ending inventory and to cost of goods sold using LIFO.

(c) Compute the gross margin for each method.

Hemming Co. reported the following current-year purchases and sales for its only product.
    

Date

Activities

Units Acquired at Cost

Units Sold at Retail

Jan.

1

Beginning inventory

220

units

@ $10.80

=

$

2,376

Jan.

10

Sales

190

units

@ $40.80

Mar.

14

Purchase

330

units

@ $15.80

=

5,214

Mar.

15

Sales

280

units

@ $40.80

July

30

Purchase

420

units

@ $20.80

=

8,736

Oct.

5

Sales

390

units

@ $40.80

Oct.

26

Purchase

120

units

@ $25.80

=

3,096

Totals

1,090

units

$

19,422

860

units

Answer 1

(a)

Computation is Cost of goods sold , Ending inventory and Gross profit by using FIFO Methods and LIFO Methods:

FIFO Methods:

Total units = 1090 units

Number of units sold = 860 units

Ending inventory = 1090 units - 860 units = 230 units

Total sale price = 860 units @ $40.80 = $35088

Cost of goods sold = 220 units @ $10.80 + 330 units @ $15.80 + 310 units @ $20.80 = $2376 + $5214 + $6448 = $14038

Gross Profit = Total sale price - Cost of goods sold = $35088 - $14038 = $21050

Ending inventory = 120 units @ $25.80 + 110 units @ $20.80 = $3096 + $2288 = $5384.

LIFO Methods:

Total units = 1090 units

Number of units sold = 860 units

Ending inventory = 1090 units - 860 units = 230 units

Total sale price = 860 units @ $40.80 = $35088

Cost of goods sold =190 units @ $10.80 + 280 units @ $15.80 + 390 units @ $20.80 = $2052 + $4424 + $8112 = $14588

Gross Profit = Total sale price - Cost of goods sold = $35088 - $14588 = $20500

Ending inventory = 30 units @ $10.80 + 50 units @ $15.80 + 30 units @ $20.80 + 120 units @ $25.80

=$324 + $790 + $624 + $3096 = $4834