Question

Question 1 The following information relates to Good Kitchen Ltd.’s inventory transactions during the month of March. Units Cost/Unit Amount Mar. 1 Beginning inventory 6,200 $19.00 $117,800 7 Sale 4,200 12 Purchase 2,300 $21.00 $48,300 16 Purchase 900 $21.00 $18,900 18 Sale 2,400 27 Purchase 3,900 $26.00 $101,400 29 Sale 3,500 All of the units sold were priced at $64.00 per unit.

Good Kitchen Ltd. uses the perpetual inventory system. Calculate Good Kitchen’s cost of goods sold, gross margin, and ending inventory for the month of March using FIFO. Cost of Goods Sold $ Gross margin $ Ending Inventory $

Good Kitchen Ltd. uses the perpetual inventory system. Calculate Good Kitchen’s cost of goods sold, gross margin, and ending inventory for the month of March using 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 $

Which of the cost formulas would produce the higher gross margin? The FIFOweighted-average method results in the higher gross margin.

Answer 1

Sales [10,100 × $64]	$646,400
Less: COGS	($85,800)
Gross profit	$560,600

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Sales [10,100 × $64]	$646,400
Less: COGS	($75,482)
Gross profit	$570,918

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Weighted Average gives highest Gross margin.