Question

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		72 units		$42,768
3		Purchase		48 units		30,192
5		Sale		27 units				$29,538
11		Purchase		24 units		15,600
15		Sale		59 units				71,803
22		Sale		34 units				39,916
28		Purchase		52 units		35,308

Soft Touch uses the perpetual inventory system.

Calculate Soft Touch Company’s cost of goods sold, gross margin, and ending inventory using:

i. FIFO
ii. Weighted-average
(Round calculations for cost per unit to 2 decimal places, e.g. 10.52 and final answers to 0 decimal places, e.g. 61,052.)

				Cost of Goods Sold		Gross Margin		Ending Inventory
i.		FIFO		$		$		$
ii.		Weighted-average		$		$		$

Answer 1

Amswer:

		Cost of goods sold		Gross Margin		Ending Inventory
FIFO	$	72,960	$	68,297	$	50,908
Weighted-average	$	73,762	$	67,495	$	50,107

i. Computation of cost of Ending inventory, Cost of goods sold & Gross profit using FIFO method is as follows:

FIFO: Perpetual Inventory system

Date	Number of Units Purchased	Cost per Unit	Purchase Cost	Number of Units Sold	Cost per Unit	Cost of Goods Sold	Number of Units Balance	Cost per Unit	Inventory Balance
April 1							72	$   594.00	$         42,768
April 3	48	$   629.00	$            30,192				72	$   594.00	$         42,768
							48	$   629.00	$         30,192
April 5				27	$   594.00	$         16,038	45	$   594.00	$         26,730
							48	$   629.00	$         30,192
April 11	24	$   650.00	$            15,600				45	$   594.00	$         26,730
							48	$   629.00	$         30,192
							24	$   650.00	$         15,600
April 15				45	$   594.00	$         26,730	34	$   629.00	$         21,386
				14	$   629.00	$           8,806	24	$   650.00	$         15,600
April 22				34	$   629.00	$         21,386	24	$   650.00	$         15,600
April 28	52	$   679.00	$            35,308				24	$   650.00	$         15,600
							52	$   679.00	$         35,308
Total	124		$            81,100	120		$         72,960	76		$        50,908

As per above working,

Cost of Ending Inventory is $ 50,908

Cost of goods sold is $ 72,960

Calculation of Gross Profit:

Gross Profit = Sales - Cost of goods sold

= $ 141,257 - $ 72,960

= $ 68,297

Working note:

Sales = $ 29,538 + $ 71,803 + $ 39,916

= $ 141,257

ii. Computation of cost of Ending inventory, Cost of goods sold & Gross profit using Weighted-average method is as follows:

Weighted-average: Perpetual Inventory system

Date	Number of Units Purchased	Cost per Unit	Purchase Cost	Number of Units Sold	Cost per Unit	Cost of Goods Sold	Number of Units Balance	Cost per Unit	Inventory Balance
April 1							72	$   594.00	$         42,768
April 3	48	$   629.00	$            30,192				72	$   594.00	$         42,768
							48	$   629.00	$         30,192
							120	$   608.00	$        72,960
April 5				27	$   608.00	$         16,416	93	$   608.00	$         56,544
April 11	24	$   650.00	$            15,600				93	$   608.00	$         56,544
							24	$   650.00	$         15,600
							117	$   616.62	$        72,144
April 15				59	$   616.62	$         36,381	58	$   616.62	$         35,764
April 22				34	$   616.62	$         20,965	24	$   616.62	$         14,799
April 28	52	$   679.00	$            35,308				24	$   616.62	$         14,799
							52	$   679.00	$         35,308
Total	124		$            81,100	120		$         73,762	76		$        50,107

As per above working,

Cost of Ending Inventory is $ 50,107

Cost of goods sold is $ 73,762

Calculation of Gross Profit:

Gross Profit = Sales - Cost of goods sold

= $ 141,257 - $ 73,762

= $ 67,495