In: Accounting
Benneett Basketball sells a variety of basketball and accessories. Information follows Bennett Basket-ball's purchase during February and March for UP-Snap, one of its top brands of basketballs.
Purchases Sales
Units Unit Cost Units Unit Price
Feb.7 18 32
Feb.23 50 $20
Feb.26 50 30
Mar.10 24 19
Mar.23 32 29
Benett uses a perpetual inventory system. On Feburary1, Bennett had 36 units on hand A COST OF $21 EACH. aLL purchases and sales during February and March were on account.
Instructions: (A) Determine the cost of goods sold and ending inventory under a perpetual inventory system using (1) FIFO and (2) weighted average. (rOUND THE WEIGHTED AVERAGE COST PER UNIT TO TWO DECIMAL PLACES). (B) Calculate gross profit using (1) FIFO AND (2) WEIGHTED AVERAGE
(A)
Determination of cost of goods sold and ending inventory under perpetual inventory system:
Feb .01 Opening stock = 36*21 = $ 756
Purchases:
Feb .23, 50 units *20 = $ 1000
Mar. 10, 24 units * 19 = $ 456
Sales:
Feb.07, 18 units *32 = $576
Feb.26, 50 units*30 = $1500
Mar 23, 32 units*29 = $ 928
Total Sales unit = 100 units
Total Sales Price = $ 3004
Weighted Average cost =Total purchase price/Number of units purchased =
(36*21+50 units *20+24 units * 19)/36+50+24 = (756+1000+456)/110 = 2212/110 = 20.11
(1)
Cost of goods sold under FIFO Method =
36 units*21 + 50 units *20 + 14 units*19 = 756 + 1000 + 266 = $ 2022.
Ending inventory in units = Opening units + Purchase units – Sold units = 36 + 74 – 100 = 10 units
Ending inventory under FIFO Method = 10 units*19 = $190
(2)
Cost of goods sold under Weighted Average Method = 100 units * 20.11 = $ 2011
Ending inventory under Weighted Average Method = 10 units*20.11 =$ 201.1
(B)
Calculation of Gross profit:
(1)
Total Sales unit = 100 units
Total Sales Price = $ 3004
Gross profit under FIFO Method = Sales price – Cost of goods sold
= $3004 - $2022 = $982
(2)
Total Sales unit = 100 units
Total Sales Price = $ 3004
Gross profit under Weighted Average Method = Sales price – Cost of goods sold
= $3004 - $2011 = $993