Question

Wooster Company imports and sells a product produced in Canada. In the summer of 2021, a natural disaster disrupted production, affecting its supply of product. On January 1, 2021, Wooster's inventory records were as follows:

Year purchased Quantity (units) Cost per unit Total cost 2019 5,000 $150 $750,000

2020 10,000 $200 2,000,000

Total 15,000 $2,750,000

Through the mid-December of 2021, purchases were limited to 14,000 units, because the cost had increased to $300 per unit. Wooster sold 18,000 units during 2021 at a price of $400 per unit, which significantly depleted its inventory. Assume that Wooster makes no further purchases during 2021. Wooster uses the LIFO inventory method. Compute Wooster's gross profit for 2021.

Select one: A. $2,200,000 B. $3,550,000 C. $1,800,000 D. $3,600,000

Assume that Wooster purchases 20,000 more of the $300 units on December 31, 2021. Wooster uses the FIFO inventory method.

Wooster's gross profit for 2021.

Select one:

A. $3,550,000

B. $2,200,000

C. $1,800,000

D. $3,600,000

Answer 1

The Solution is as follows;