Question

You have the following information for Tamarisk, Inc. for the month ended October 31, 2017. Tamarisk, Inc. uses a periodic method for inventory. Date Description Units Unit Cost or Selling Price Oct. 1 Beginning inventory 63 $25 Oct. 9 Purchase 114 27 Oct. 11 Sale 96 34 Oct. 17 Purchase 102 28 Oct. 22 Sale 54 39 Oct. 25 Purchase 67 30 Oct. 29 Sale 109 39

Calculate the weighted-average cost. (Round answer to 3 decimal places, e.g. 5.125.) Weighted-average cost per unit $ SHOW LIST OF ACCOUNTS LINK TO TEXT

Calculate ending inventory, cost of goods sold, gross profit under each of the following methods. (1) LIFO. (2) FIFO. (3) Average-cost. (Round answers to 0 decimal place, e.g. 125.) LIFO FIFO AVERAGE-COST The ending inventory $ $ $ The cost of goods sold $ $ $ Gross profit $ $ $ SHOW LIST OF ACCOUNTS LINK TO TEXT

Calculate gross profit rate under each of the following methods. (1) LIFO. (2) FIFO. (3) Average-cost. (Round answers to 1 decimal place, e.g. 51.2%) LIFO FIFO AVERAGE-COST Gross profit rate % % %

Answer 1

Answer)

Calculation of weighted average cost

Weighted Average cost = Aggregate cost of units in the beginning inventory and units purchased during the period/ Aggregate number of units in the beginning inventory and units purchased during the period

Date	Description	Number of Units	Unit Cost	Total Cost
Oct'1	Beginning Inventory	63	$             25	$         1,575
Oct'9	Purchase	114	$             27	$         3,078
Oct'17	Purchase	102	$             28	$         2,856
Oct'25	Purchase	67	$             30	$         2,010
Total	346		$         9,519

                       

Weighted Average cost = $ 9,519/ 346 units

                                           = $ 27.512 per unit

Therefore weighted average cost is $ 27.512 per unit.

Answer 1)

Calculation of value of ending inventory, cost of goods sold and gross profit under LIFO method, periodic inventory system

Cost of Goods sold

Under LIFO method using periodic inventory system, cost of goods sold is calculated on the assumption that units of inventory which are latest bought will be sold first and so on. Thus the cost of goods sold will be from the units of inventory which are latest and moving backwards.

Date	Description	Number of Units	Unit Cost	Total Cost
Oct'9	Purchase	90	$             27	$         2,430
Oct'17	Purchase	102	$             28	$         2,856
Oct'25	Purchase	67	$             30	$         2,010
Total	259		$         7,296

Therefore the cost of goods sold using LIFO method, periodic inventory system is $ 7,296.

Value of ending inventory

Under LIFO method using periodic inventory system, Value of ending inventory is calculated on the assumption that units of inventory which are latest bought will be sold first and so on. Thus value of ending inventory will be from the units of inventory which are first bought and moving forwards.

Date	Description	Number of Units	Unit Cost	Total Cost
Oct'1	Beginning Inventory	63	$             25	$         1,575
Oct'9	Purchase	24	$             27	$             648
Total	87		$         2,223

Therefore value of ending inventory using LIFO method, periodic inventory system is $ 2223.

Calculation of Gross Profit under LIFO

Gross Profit = Sales – Cost of goods sold

                      = $ 9,621 - $ 7,296

                      = $ 2,325

Answer 2)

Calculation of value of ending inventory, cost of goods sold and gross profit under FIFO method, periodic inventory system

Cost of Goods sold

Under FIFO method using periodic inventory system, cost of goods sold is calculated on the assumption that units of inventory which are first bought will be sold first and so on. Thus the cost of goods sold will be from the units of inventory which are first and moving forward.

Date	Description	Number of Units	Unit Cost	Total Cost
Oct'1	Beginning Inventory	63	$             25	$         1,575
Oct'9	Purchase	114	$             27	$         3,078
Oct'17	Purchase	82	$             28	$         2,296
Total	259		$         6,949

Therefore the cost of goods sold using FIFO method, periodic inventory system is $ 6,949.

Value of ending inventory

Under FIFO method using periodic inventory system, Value of ending inventory is calculated on the assumption that units of inventory which are first bought will be sold first and so on. Thus value of ending inventory will be from the units of inventory which are Latest bought and moving backwards.

Date	Description	Number of Units	Unit Cost	Total Cost
Oct'17	Purchase	20	$             28	$             560
Oct'25	Purchase	67	$             30	$         2,010
Total	87		$         2,570

Therefore value of ending inventory using FIFO method, periodic inventory system is $ 2,570.

Calculation of Gross Profit under FIFO

Gross Profit = Sales – Cost of goods sold

                      = $ 9,621 - $ 6,949

                      = $ 2,672

Answer 3)

Calculation of value of ending inventory, cost of goods sold and gross profit under Average cost method, periodic inventory system

Under average cost inventory method using periodic inventory system, value of ending inventory and cost of goods sold is calculated on the basis of a weighted average cost. Such cost is calculated by dividing the aggregate cost of units in the beginning inventory and cost units purchased during the period by the aggregate number of units in the beginning inventory and units purchased during the period.

The average cost has already been calculated in first answer, i.e. $ 27.512 per unit

Cost of goods sold = Number of units sold X weighted average cost per unit

                                  = 259 units X $ 27.512 per unit

                                  = $ 7,126 (rounded off)

Therefore cost of goods sold under average cost method is $ 7,126

Value of ending inventory = Number of in ending inventory X weighted average cost per unit

                                                = 87 units X $ 27.512 per unit

                                                 = $ 2,393

Therefore value of ending inventory under average cost method is $ 2,393.

Calculation of Gross Profit under FIFO

Gross Profit = Sales – Cost of goods sold

                      = $ 9,621 - $ 7,126

                      = $ 2,495

Working Notes:

Calculation of number of units sold

Number of units sold = 96 units + 54 units + 109 units

                                        = 259 units

Calculation of number of units in ending inventory

Number of units in ending inventory = Number of units in beginning inventory + Number of units purchased during the period – Number of units sold

                                                                              = 63 units + (114 units + 102 units + 67 units) – 259 units

                                                                              = 87 units

Calculation of Total Sales revenue:

Date	Description	Number of Units	Unit Price	Total Sales
Oct'11	Sale	96	$              34	$           3,264
Oct'22	Sale	54	$              39	$           2,106
Oct'29	Sale	109	$              39	$           4,251
Total	259		$           9,621

Answer)

Calculation of Gross Profit rate under LIFO Method, FIFO Method and Average cost method

	LIFO	FIFO	Average Cost
Sales	$                  9,621	$           9,621	$            9,621
Less: Cost of Goods Sold	$                  7,296	$           6,949	$            7,126
Gross Profit	$                  2,325	$           2,672	$            2,495
Gross Profit rate (Gross Profit/ Sales)	24.2%	27.8%	25.9%