Question

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Warnerwoods Company uses a periodic 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

160

units

@ $50 per unit

Mar.

5

Purchase

460

units

@ $55 per unit

Mar.

9

Sales

480

units

@ $85 per unit

Mar.

18

Purchase

240

units

@ $60 per unit

Mar.

25

Purchase

320

units

@ $62 per unit

Mar.

29

Sales

280

units

@ $95 per unit

Totals

1,180

units

760

units

For specific identification, the March 9 sale consisted of 60 units from beginning inventory and 420 units from the March 5 purchase; the March 29 sale consisted of 100 units from the March 18 purchase and 180 units from the March 25 purchase.

4. Compute gross profit earned by the company for each of the four costing methods. (Round your average cost per unit to 2 decimal places and final answers to nearest whole dollar.)

Answer 1

Total Sales Value => (480*85)+(280*95) => $ 67,400.

1.

COST OF GOODS SOLD (SPECIFIC IDENTIFICATION)

Date	Qty	Rate	Amt ($)
9/3	60	50	3,000
9/3	420	55	23,100
29/3	100	60	6,000
29/3	180	62	11,160
total			43,260

Gross Profit => $ 67,400- 43,260 = $ 24,140.

2.

COST OF GOODS SOLD (FIFO)

Date	Qty	Rate	Amt ($)
9/3	160	50	8,000
9/3	320	55	17,600
29/3	140	55	7,700
29/3	140	60	8,400
total			41,700

Gross Profit => $ 67,400-41,700 = 25,700

3.

COST OF GOODS SOLD (LIFO)

Date	Qty	Rate	Amt ($)
9/3	20	50	1,000
9/3	460	55	25,300
29/3	280	62	17,360
total			43,660

Gross Profit => $ 67,400-43,660= 23,740.

4.

COST OF GOODS SOLD (WEIGHTED AVERAGE)

Date	Qty	Rate	Amt ($)
9/3	480	53.71	25,780.80
9/3
29/3	280	57.94	16703.74
total			42,484.54

Weighted Rate for 9/3 => (160*50+460*55)/(160+460) => 53.71

Weighted Rate for 29/3 => (140*53.71+240*55+320*62)/(140+240+320) => 59.66

So, Gross profit => $ 67400 - 42484.54 => 24,915.46.