Question

Warnerwoods Company uses a perpetual inventory system. It entered into the following purchases and sales transactions for March.

Date

Activities

Units Acquired at Cost

Units Sold at Retail

Mar.

1

Beginning inventory

120

units

@ $51.40 per unit

Mar.

5

Purchase

235

units

@ $56.40 per unit

Mar.

9

Sales

280

units

@ $86.40 per unit

Mar.

18

Purchase

95

units

@ $61.40 per unit

Mar.

25

Purchase

170

units

@ $63.40 per unit

Mar.

29

Sales

150

units

@ $96.40 per unit

Totals

620

units

430

units

4. Compute gross profit earned by the company for each of the four costing methods. For specific identification, the March 9 sale consisted of 75 units from beginning inventory and 205 units from the March 5 purchase; the March 29 sale consisted of 55 units from the March 18 purchase and 95 units from the March 25 purchase. (Round weighted average cost per unit to two decimals and final answers to nearest whole dollar.)

Answer 1

• All working forms part of the answer
• Value of Cost of Goods Sold and Closing Inventories are calculated on the basis of Perpetual Method
• Amounts are in $
• Working for Sales

Sales	Units	Rate	Amount
Mar-09	280	86.4	24192
Mar-29	150	96.4	14460
Total	430		38652

Gross Profits = Sales – Cost of Goods Sold

• Calculation of Cost of Goods Sold by:
• FIFO

FIFO	Opening + Purchases			Cost of Goods Sold			Closing Inventory
Opening units	120	51.40	6168				120	51.40	6168.00
Mar 5 Purchase	235	56.40	13254				120	51.40	6168.00
							235	56.40	13254.00
Mar 9 Sales				120	51.40	6168	75	56.40	4230.00
				160	56.40	9024			0.00
Mar 18 Purchase	95	61.40	5833				75	56.40	4230.00
							95	61.40	5833.00
Mar 25 Purchase	170	63.40	10778				75	56.40	4230.00
							95	61.40	5833.00
							170	63.40	10778.00
Mar 29 Sales				75	56.40	4230.00	20	61.40	1228.00
				75	61.40	4605.00	170	63.40	10778.00
TOTAL	620		36033	430		24027	190		12006
	Units	Value
Cost of Goods Sold	430	24027
Closing Inventory	190	12006
Gross Profit	38652 - 24027	=$14625

• LIFO

LIFO	Opening + Purchases			Cost of Goods Sold			Closing Inventory
Opening units	120	51.40	6168				120	51.40	6168.00
Mar 5 Purchase	235	56.40	13254				120	51.40	6168.00
							235	56.40	13254.00
Mar 9 Sales				235	56.40	13254	75	51.40	3855.00
				45	51.40	2313
Mar 18 Purchase	95	61.40	5833				75	51.40	3855.00
							95	61.40	5833.00
Mar 25 Purchase	170	63.40	10778				75	51.40	3855.00
							95	61.40	5833.00
							170	63.40	10778.00
Mar 29 Sales				150	63.40	9510.00	75	51.40	3855.00
							95	61.40	5833.00
							20	63.40	1268.00
TOTAL	620		36033.00	430		25077.00	190		10956
	Units	Value
Cost of Goods Sold	430	25077
Closing Inventory	190	10956
Gross Profit	(38652 – 25077)	$13575

• Weighted Average Method

Weighted Average cost	Opening + Purchases			Cost of Goods Sold			Closing Inventory
Opening	120	51.40	6168				120	51.40	6168.00
Mar 5 Purchase	235	56.4	13254				355	54.71	19422.00
Mar 9 Sales				280	54.71	15319.00	75	54.71	4103.00
Mar 18 Purchase	95	61.4	5833				170	58.45	9936.00
Mar 25 Purchase	170	63.40	10778				340	60.92	20715.00
Mar 29 Sales				150	60.92	9138.00	190	60.92	11576.00
TOTAL	620		36033.00	430		24457.00	190	18.15	11576
	Units	Value
Cost of Goods Sold	430	24457.00
Closing Inventory	190	11576
Gross Profit	(38652 – 24457)	$14195

• Specific Identification Method

Specific Identification	Opening + Purchases			Cost of Goods Sold			Closing Inventory
Opening units	120	51.40	6168				120	51.40	6168.00
Mar 5 Purchase	235	56.40	13254				120	51.40	6168.00
							235	56.40	13254.00
Mar 9 Sales				75	51.40	3855	45	51.40	2313.00
				205	56.40	11562	30	56.40	1692.00
Mar 18 Purchase	95	61.40	5833				45	51.40	2313.00
							30	56.40	1692.00
							95	61.40	5833.00
Mar 25 Purchase	170	63.40	10778				45	51.40	2313.00
							30	56.40	1692.00
							95	61.40	5833.00
							170	63.40	10778.00
Mar 29 Sales				55	61.40	3377.00	45	51.40	2313.00
				95	63.40	6023.00	30	56.40	1692.00
							40	61.40	2456.00
							75	63.40	4755.00
TOTAL	620		36033.00	430		24817.00	190		11216.00
	Units	Value
Cost of Goods Sold	430	24817
Closing Inventory	190	11216
Gross Profits	(38652 – 24817)	$13835