Question
In: Accounting
The Soft Touch Company sells leather furniture. The following schedule relates to the company's inventory for...
The Soft Touch Company sells leather furniture. The following schedule relates to the company's inventory for the month of April:
COST SALES
April 1 ---------- Beginning Inventory---------------- 75 units ---------------- $45,000
April 3 ---------- Purchase ------------------------------50 units -----------------$31,250
April 5-----------Sale -------------------------------------30 units-------------------------------------- $33,000
April 11----------Purchase ------------------------------25 units------------------$16,250
April 15 ---------Sale--------------------------------------55 units --------------------------------------$68,750
April 22----------Sale-------------------------------------40 units----------------------------------------$48,000
April 28----------Purchase------------------------------50 units-------------------$33,750
Soft Touch uses the perpetual inventory system
a.) Calculate Soft Touch Company's cost of goods sold, gross margin, and ending inventory using: i.) FIFO ii.) Weighted Average
b.) Which cost formula produced the higher gross margin?
Solutions
Expert Solution
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| Part 1: | FIFO | ||||||||||
| Purchase | Sale | Ending Inventory | |||||||||
| Date | Units | Rate | Cost | Units | Rate | Cost | Units | Rate | Cost | ||
| Apr 1 | 75 | $600.000 | $45,000.00 | ||||||||
| Apr 3 | 50 | $625.000 | $31,250 | 75 | $600.000 | $45,000.00 | |||||
| 50 | $625.000 | $31,250.00 | |||||||||
| Apr 5 | 30 | $ 600.000 | $ 18,000 | 45 | $600.000 | $27,000.00 | |||||
| 50 | $625.000 | $31,250.00 | |||||||||
| Apr 11 | 25 | $650.000 | $16,250 | 45 | $600.000 | $27,000.00 | |||||
| 50 | $625.000 | $31,250.00 | |||||||||
| 25 | $650.000 | $16,250.00 | |||||||||
| Apr 15 | 45 | $ 600.000 | $ 27,000 | 40 | $625.000 | $25,000.00 | |||||
| 10 | $ 625.00 | $ 6,250 | 25 | $ 650.00 | $16,250.00 | ||||||
| Apr 22 | 40 | $ 625.00 | $ 25,000 | 25 | $ 650.00 | $16,250.00 | |||||
| Apr 28 | 50 | $675.000 | $33,750 | 25 | $ 650.00 | $16,250.00 | |||||
| 50 | $ 675.00 | $33,750.00 | |||||||||
| Total | $76,250.00 | $50,000.00 | |||||||||
| Endning Inventory | $ 50,000.00 | ||||||||||
| COGS | $ 76,250.00 | ||||||||||
| Sales | $ 149,750 | ||||||||||
| Cost of Goods Sold | $ 76,250 | ||||||||||
| Gross Margin | $ 73,500 | ||||||||||
| Part -2 | Weighted Average | ||||||||||
| Purchase | Sale | Ending Inventory | |||||||||
| Date | Units | Rate | Cost | Units | Rate | Cost | Units | Rate | Cost | ||
| Apr 1 | 75 | $600.000 | $45,000.00 | ||||||||
| Apr 3 | 50 | $625.000 | $31,250 | 125 | $610.000 | $76,250.00 | |||||
| Apr 5 | 30 | $ 610.000 | $ 18,300 | 95 | $610.000 | $57,950.00 | |||||
| Apr 11 | 25 | $650.000 | $16,250 | 120 | $618.333 | $74,200.00 | |||||
| Apr 15 | 55 | $ 618.333 | $ 34,008 | 65 | $618.333 | $40,191.67 | |||||
| Apr 22 | 40 | $ 618.333 | $ 24,733 | 25 | $618.333 | $15,458.33 | |||||
| Apr 28 | 50 | $675.000 | $33,750 | 75 | $656.111 | $49,208.33 | |||||
| Total | $ 77,042 | $49,208.33 | |||||||||
| Endning Inventory | $ 49,208.33 | ||||||||||
| COGS | $ 77,041.67 | ||||||||||
| Sales | $ 149,750 | ||||||||||
| Cost of Goods Sold | $ 77,042 | ||||||||||
| Gross Margin | $ 72,708 | ||||||||||
ekkarill92 answered 2 years agoRelated Solutions
Soft Touch Company sells leather furniture. The following schedule relates to the company’s inventory for the...
Soft Touch Company sells leather furniture. The following
schedule relates to the company’s inventory for the month of
April:
Cost
Sales
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Beginning inventory
72 units
$42,768
3
Purchase
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30,192
5
Sale
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$29,538
11
Purchase
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15,600
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Sale
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71,803
22
Sale
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39,916
28
Purchase
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32,754
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Sale
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