Question

The following information is available with respect to the purchases and sales of merchandise during the first part of January 2019:

Jan. 1                   opening inventory          3,000 units at $25.00 each         

Jan. 10                purchased                         4,500 units at $35.00 each

Jan. 12                sold                                    3,500 units

Jan. 15                purchased                        1,000 units at $32.50 each

Jan. 21                sold                                    1,500 units  

Required:

1. Calculate the Cost of Goods Sold and Ending Inventory using FIFO and Moving Weighted Average Cost using the costing worksheets provided below.   

2. Calculate the Gross Profit under FIFO and Moving Weighted Average. Assume a net selling price of $ 50.00 per unit sold.    Show your calculations in the space provided below each worksheet.                                                                               

FIFO

Answer 1

1)Gross Profit, Cost of Goods Sold and Ending Inventory using FIFO is calculated as follows:rh

FIFO Method:

Date		Purchase	Sale	Ending Inventory
Jan. 1	Opening Inventory			3,000 units * $25 = $75,000
Jan. 10	Purchase	4,500 units * $35 = $157,500		3,000 units * $25 = $75,000
				4,500 units * $35 = $157,500
Jan. 12	Sold		3,000 units * $25 = $75,000	4,000 units * $35 = $140,000
			500 units * $35 = $17,500
Jan. 15	Purchase	1,000 units * $32.5 = $32,500		4,000 units * $35 = $140,000
				1,000 units * $32.5 = $32,500
Jan. 21	Sold		1,500 units * $35 = $52,500	2,500 units * $35 = $87,500
				1,000 units * $32.5 = $32,500
			Total Ending Inventory	3,500 units = $120,000

a) Ending Inventory is $120,000

b) Cost of Goods Sold = Opening Inventory + Purchases - Ending Inventory

                                   = $75,000 + ( $157,500 + $32,500) - $120,000

                                   = $265,000 - $120,000

                                    = $145,000

c) Gross Profit = Sale - Cost of Goods Sold

                       = ( 3,500 units + 1,500 units ) * $50 Per Unit - Cost of Goods Sold

                       = 5,000 Units * $50 Per Unit - $145,000

                       = $250,000 - $145,000

                       = $105,000

2) Gross Profit, Cost of Goods Sold and Ending Inventory using moving average method is calculated as follows:

Moving average method:

Cost Per Unit = ($75,000 + $157,500 + $32,500) / (3,000 units + 4,500 units + 1,000 units)

                    = $265,000 / 8,500 Units

                    = $31.18 Per Unit

a) Ending Inventory =

(3,000 units + 4,500 units + 1,000 units) - ( 3,500 units + 1,500 units ) * $31.18 Per Unit

= (8,500 Units - 5,000 Units) * $31.18 Per Unit

= $109,130

b) Cost of Goods Sold = Opening Inventory + Purchases - Ending Inventory

                                    = $75,000 + ( $157,500 + $32,500) - $109,130

                                    = $265,000 - $109,130

                                    = $155,870

c) Gross Profit = Sale - Cost of Goods Sold

                       = ( 3,500 units + 1,500 units ) * $50 Per Unit - Cost of Goods Sold

                       = 5,000 Units * $50 Per Unit - $155,870

                       = $250,000 - $155,870

                       = $94,130