Question

Ayayai Ltd. uses the perpetual inventory system and reports the following inventory transactions for the month of June:

Date			Explanation		Units		Unit Cost/Price					Total Cost
June	1		Beginning inventory		1,480			$5				$7,400
	12		Purchases		2,340			6				14,040
	15		Sale		(2,420	)		12
	16		Purchases		4,280			7				29,960
	23		Purchases		1,580			8				12,640
	27		Sales		(5,580	)		15

alculate the gross profit for the month of June using (1) FIFO and (2) average cost. (Round average final answers to 2 decimal places, e.g. 1.25. Do not round intermediate calculations.)

	FIFO	Average Cost
Gross profit	$enter a dollar amount	$enter a dollar amount

Answer 1

Calculation of gross profit as per FIFO method

Date	Explanation	units	unit cost	total cost
1	Opening inventory	1480	5	7400
12	Purchase	2340	6	14040
15	Sale(1480 from opening inventory and 940 from purchse of 12 june)	2420	(1480*5+940*6)	(13040)

Inventory on 16 june 2340-940*6= 8400

Date	Explanation	Units	Unit cost	Total cost
16	Inventory	1400	6	8400
16	Purchase	4280	7	29960
23	Purchse	1580	8	12640
27	Sale	5580	(1400*6+4180*7)	(37660)
	CLosing inventory			13340

Gross Profit = Sales - Cost of goods sold

= (2420*12+5580*15) - (13040+37660)

= 62040

Calculation of Gross Profit as per Average Cost method

Date	Explanation	Unit	Unit Cost	Total cost
1	Op inventory	1480	5	7400
12	Purchase	2340	6	14040
	Average cost(14070+7400/1480+2340)		5.61
15	Sale	2420	5.61	13576
	Inventory on 16th june	(1480+2340-2420)=1400		(7400+14040-13576)=7864
16	Purchase	4280	7	29960
23	Purchase	1580	8	12640
24	Average Cost	(1400+4280+1580)=7260	(7864+29960+12640)/7260=6.950964	650464
27	Sale	5580	6.950964	38786

Gross Profit = Sales - Cost of goods sold

=(2420*12+5580*15) - (13576+38786)

=60378