Question
In: Accounting
Dalia Wahebi sells one type of machine, a mini-blender. She provides the following information for May...
Dalia Wahebi sells one type of machine, a mini-blender. She provides the following information for May 2018.
Dalia held 2 mini-blenders in inventory at 1 May 2018. They cost $1,200 each
|
Date |
Purchases |
Date |
Sales |
|
1 May |
3 @ $1,250 |
2 May |
4 @ $2,900 |
|
7 May |
4 @ $1,300 |
17 May |
4 @ $3,000 |
|
21 May |
8 @ $1,450 |
24 May |
7 @ $3,000 |
Dalia wants to know the value of closing inventory and also her Gross Profit for the month of May 2018.
REQUIRED
(a) Calculate the value of the closing inventory using FIFO and AVCO.
(b) Calculate the Gross Profit for the month of May 2018.
Solutions
Expert Solution
1)FIFO METHOD:
Inventory value = 2900
Cost of goods sold = 20,050
Gross profit = 44600- 20050 = 24550
| Date | Purchase | Cost of goods sold | Balance | |||||
| Units | rate | Units | rate | amount | Units | rate | amount | |
| Opening | 2 | 1200 | 2400 | |||||
| 01-May-20 | 3 | 1250 | 2 | 1200 | 2400 | |||
| 3 | 1250 | 3750 | ||||||
| Inventory | 6150 | |||||||
| 02-05-20 | 2 | 1200 | 2400 | 1 | 1250 | 1250 | ||
| 2 | 1250 | 2500 | ||||||
| Inventory | 1250 | |||||||
| 07-05-20 | 4 | 1300 | 1 | 1250 | 1250 | |||
| 4 | 1300 | 5200 | ||||||
| 6450 | ||||||||
| 17-05-20 | 1 | 1250 | 1250 | 1 | 1300 | 1300 | ||
| 3 | 1300 | 3900 | ||||||
| Inventory | 1300 | |||||||
| 21-05-20 | 8 | 1450 | 1 | 1300 | 1300 | |||
| 8 | 1450 | 11600 | ||||||
| Inventory | 12900 | |||||||
| 24-05-20 | 1 | 1300 | 1300 | 2 | 1450 | 2900 | ||
| 6 | 1450 | 8700 | ||||||
| Cost | 20050 | Inventory | 2900 |
2) AVCO METHOD:
Inventory value = 2,864
Cost of goods sold = 20,106
Gross profit = 44600 - 20106 = 24,494
| Date | Purchase | Cost of goods sold | Balance | |||||
| Units | rate | Units | rate | amount | Units | rate | amount | |
| Opening | 2 | 1200 | 2400 | |||||
| 01-May-20 | 3 | 1250 | 2 | 1200 | 2400 | |||
| 3 | 1250 | 3750 | ||||||
| 5 | 1230 | 6150 | ||||||
| Inventory | 6150 | |||||||
| 02-05-20 | 4 | 1230 | 4920 | 1 | 1230 | 1230 | ||
| Inventory | 1230 | |||||||
| 07-05-20 | 4 | 1300 | 1 | 1230 | 1250 | |||
| 4 | 1300 | 5200 | ||||||
| 5 | 1290 | 6450 | ||||||
| Inventory | 6450 | |||||||
| 17-05-20 | 4 | 1290 | 5160 | 1 | 1290 | 1290 | ||
| Inventory | 1290 | |||||||
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