In: Accounting
Hemming Co. reported the following current-year purchases and sales
for its only product.
Date | Activities | Units Acquired at Cost | Units Sold at Retail | |||||||||||||
Jan. | 1 | Beginning inventory | 220 | units | @ $10.80 | = | $ | 2,376 | ||||||||
Jan. | 10 | Sales | 190 | units | @ $40.80 | |||||||||||
Mar. | 14 | Purchase | 330 | units | @ $15.80 | = | 5,214 | |||||||||
Mar. | 15 | Sales | 280 | units | @ $40.80 | |||||||||||
July | 30 | Purchase | 420 | units | @ $20.80 | = | 8,736 | |||||||||
Oct. | 5 | Sales | 390 | units | @ $40.80 | |||||||||||
Oct. | 26 | Purchase | 120 | units | @ $25.80 | = | 3,096 | |||||||||
Totals | 1,090 | units | $ | 19,422 | 860 | units | ||||||||||
Required:
Hemming uses a periodic inventory system.
(a) Determine the costs assigned to ending inventory and to cost of
goods sold using FIFO.
(b) Determine the costs assigned to ending inventory and to cost of goods sold using LIFO.
(c) Compute the gross margin for each method.
Required:
Hemming uses a periodic inventory system.
(a) Determine the costs assigned to ending inventory and to cost of
goods sold using FIFO.
(b) Determine the costs assigned to ending inventory and to cost of goods sold using LIFO.
(c) Compute the gross margin for each method.
a) Periodic FIFO | Cost of Goods Available for Sale | Cost of Goods Sold | Ending Inventory | ||||||
# of units | Cost per unit | Cost of Goods Available for Sale | # of units sold | Cost per unit | Cost of Goods Sold | # of units in ending inventory | Cost per unit | Ending Inventory | |
Beginning inventory | not attempted | not attempted | not attempted | not attempted | |||||
Purchases: | |||||||||
March 14 | not attempted | not attempted | not attempted | not attempted | |||||
July 30 | not attempted | not attempted | not attempted | not attempted | |||||
October 26 | not attempted | not attempted | not attempted | not attempted | |||||
Total | 0 | $0 | 0 | $0 | 0 | $0 | |||
b) Periodic LIFO | Cost of Goods Available for Sale | Cost of Goods Sold | Ending Inventory | ||||||
# of units | Cost per unit | Cost of Goods Available for Sale | # of units sold | Cost per unit | Cost of Goods Sold | # of units in ending inventory | Cost per unit | Ending Inventory | |
Beginning inventory | not attempted | not attempted | |||||||
Purchases: | |||||||||
March 14 | not attempted | not attempted | |||||||
July 30 | not attempted | not attempted | |||||||
October 26 | not attempted | not attempted | |||||||
Total | 0 | $0 | 0 | $0 | 0 | $0 | |||
c) Gross Margin | FIFO | LIFO | |||||||
not attempted | not attempted | not attempted | |||||||
not attempted | not attempted | not attempted | |||||||
Cost of goods available for sale | Cost of goods sold - Periodic FIFO | Ending Inventory - Periodic FIFO | |||||||
FIFO | # of units (A) | Cost per unit | Cost of goods available for sale | # of units sold (B) | Cost per unit | Cost of goods sold | # of units in ending inventory (A) - (B) | Cost per unit | Ending Inventory |
Beginning Inventory | 220 | $ 10.80 | $ 2,376 | 220 | $ 10.80 | $ 2,376 | 0 | $ 10.80 | $0 |
Purchases: | |||||||||
Mar-14 | 330 | $ 15.80 | $ 5,214 | 330 | $ 15.80 | $ 5,214 | 0 | $ 15.80 | $0 |
Jul-30 | 420 | $ 20.80 | $ 8,736 | 310 | $ 20.80 | $ 6,448 | 110 | $ 20.80 | $ 2,288 |
Oct-26 | 120 | $ 25.80 | $ 3,096 | $ 25.80 | $ - | 120 | $ 25.80 | $ 3,096 | |
1,090 | $ 19,422 | 860 | $ 14,038 | 230 | $ 5,384 | ||||
Cost of goods available for sale | Cost of goods sold - Periodic LIFO | Ending Inventory - Periodic LIFO | |||||||
LIFO | # of units (A) | Cost per unit | Cost of goods available for sale | # of units sold (B) | Cost per unit | Cost of goods sold | # of units in ending inventory (A) - (B) | Cost per unit | Ending Inventory |
Beginning Inventory | 220 | $ 10.80 | $ 2,376 | 0 | $ 10.80 | $0 | 220 | $ 10.80 | $ 2,376 |
Purchases: | |||||||||
Mar-14 | 330 | $ 15.80 | $ 5,214 | 320 | $ 15.80 | $ 5,056 | 10 | $ 15.80 | $ 158 |
Jul-30 | 420 | $ 20.80 | $ 8,736 | 420 | $ 20.80 | $ 8,736 | 0 | $ 20.80 | $0 |
Oct-26 | 120 | $ 25.80 | $ 3,096 | 120 | $ 25.80 | $ 3,096 | 0 | $ 25.80 | $0 |
1,090 | $ 19,422 | 860 | $ 13,792 | 230 | $ 2,534 | ||||
Gross Margin | = | Sales Revenue | - | Cost of goods sold | |||||
Sales Revenue | = | 860 X $40.80 | = | $ 35,088 | |||||
Under FIFO | |||||||||
Gross Margin | = | Sales Revenue | - | Cost of goods sold | |||||
= | $ 35,088 | - | $ 14,038 | ||||||
= | $ 21,050 | ||||||||
Under LIFO | |||||||||
Gross Margin | = | Sales Revenue | - | Cost of goods sold | |||||
= | $ 35,088 | - | $ 13,792 | ||||||
= | $ 21,296 |