Question

Cast Iron Grills, Inc., manufactures premium gas barbecue grills. The company reports inventory and cost of goods sold based on calculations from a LIFO periodic inventory system. Cast Iron’s December 31, 2021, fiscal year-end inventory consisted of the following (listed in chronological order of acquisition): Units Unit Cost 8,800 $ 600 5,900 700 9,800 800 The replacement cost of the grills throughout 2022 was $900. Cast Iron sold 46,000 grills during 2022. The company's selling price is set at 200% of the current replacement cost. What needs to be calculated: 1. & 2. Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2022 under two different assumptions. First, that Cast Iron purchased 47,000 units and, second, that Cast Iron purchased 24,500 units during the year. 4. Please help me compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2022 assuming that Cast Iron purchased 47,000 units (as per the first assumption) and 24,500 units (as per the second assumption) during the year and uses the FIFO inventory cost method rather than the LIFO method. Thanks!

Answer 1

LIFO
47000 Units Purchased
PARTICULARS (a)	UNIT(b)	UNIT PRICE (c)	TOTAL VALUE (d)=c*b	COST OF GOODS SOLD(e)	GROSS PROFIT(d-e)	CLOSING INVENTORY	COST OF GOODS SOLD CALCULATION
Purchase 1	8,800.00	600.00	52,80,000.00			52,80,000.00
Purchase 2	5,900.00	700.00	41,30,000.00			94,10,000.00
Purchase 3	9,800.00	800.00	78,40,000.00			1,72,50,000.00
Purchase 4	47,000.00	900.00	4,23,00,000.00			5,95,50,000.00
Sales	46,000.00	1,800.00	8,28,00,000.00	4,14,00,000.00	4,14,00,000.00	1,81,50,000.00	(46000*900)
Cost of goods sold		4,14,00,000.00
Closing Inventory		1,81,50,000.00
Gross Profit		4,14,00,000.00
Gross Profit Ratio		Gross profit/ Net sales
		13800000/82800000
		50.00%
LIFO 24500 UNITS PURCHASE
Cost of Goods Sold of 46000 Units
Last Purchase	24500*900		2,20,50,000.00
Purchase 3	9800*800		78,40,000.00
Purchase 2	5900*700		41,30,000.00
Purchase 1	5800*600		34,80,000.00
			3,75,00,000.00
Sale Value	46000*1800	8,28,00,000.00
Gross Profit			4,53,00,000.00
Gross Profit Ratio	37500000/82800000	54.71%
Closing Inventory	3000*600		18,00,000.00
FIFO 47000 UNITS PURCHASE
Cost Of Goods Sold of 46000 Units
Purchase 1	8800*600		52,80,000.00
Purchase 2	5900*700		41,30,000.00
Purchase 3	9800*800		78,40,000.00
Purchase 4	21500*900		1,93,50,000.00
			3,66,00,000.00
Sale Value			8,28,00,000.00
Gross profit			4,62,00,000.00
Gross Profit Ratio	46200000/82800000	55.80%
Clossing Inventory	25500*900		2,29,50,000.00
FIFO 24500 UNITS PURCHASE
Cost Of Goods Sold of 46000 Units
Purchase 1	8800*600		52,80,000.00
Purchase 2	5900*700		41,30,000.00
Purchase 3	9800*800		78,40,000.00
Purchase 4	21500*900		1,93,50,000.00
			3,66,00,000.00
Sale value			8,28,00,000.00
Gross Profit			4,62,00,000.00
Gross Profit ratio			55.80%
Clossing Inventory	3000*900		27,00,000.00