Question

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 perpetual inventory system.
  
1. Determine the costs assigned to ending inventory and to cost of goods sold using FIFO.
2. Determine the costs assigned to ending inventory and to cost of goods sold using LIFO.
3. Compute the gross margin for FIFO method and LIFO method.

Answer 1

below answer complete based on Inventory - FIFO and LIFO method and derived Margin under both method  

	FIFO	Cost of Goods available for sale			Cost of Goods Sold			Inventory Balance
Date		Unit	Cost$ / Unit	cost of goods available for sale	Unit	Cost$ / Unit	Cost of Goods Sold $	Unit	Cost$ / Unit	Inventory Balances $
Jan1	Opening	220	10.8	2376				220	10.8	2376
Jan10	Sale				190	10.8	2052	30	10.8	324	( Logic - Opening Inventory 220 Unit - Sale 190 (rate / unit closing $10.80/unit
Mar14	Purchase	330	15.8	5214				30	10.8	324
								330	15.8	5214
Mar15	Sale				30	10.8	324				( sale unit -280 as per Question)-FIFO - adjust 30 unit first
					250	15.8	3950	80	15.8	1264
July 30	Purchase	420	20.8	8736				80	15.8	1264
								420	20.8	8736
Oct 5	Sale				80	15.8	1264				( sale unit -390 as per Question)-FIFO - adjust 80 unit first
					310	40.8	12648	110	20.8	2288
Oct 26	Purchase	120	25.8	3096				110	20.8	2288	A
								120	25.8	3096	B
	Total						20238			5384	(SUM of A-B)

	LIFO	Cost of Goods available for sale			Cost of Goods Sold			Inventory Balance
Date		Unit	Cost$ / Unit	cost of goods available for sale	Unit	Cost$ / Unit	Cost of Goods Sold $	Unit	Cost$ / Unit	Inventory Balances $
Jan1	Opening	220	10.8	2376				220	10.8	2376
Jan10	Sale				190	10.8	2052	30	10.8	324	( Logic - Opening Inventory 220 Unit - Sale 190 (rate / unit closing $10.80/unit
Mar14	Purchase	330	15.8	5214				30	10.8	324
								330	15.8	5214
Mar15	Sale				280	15.8	4424	30	10.8	324	( sale unit -280 as per Question)-LIFO - adjust 50 unit (Purchase 330 -sale 280 unit )
								50	15.8	790
July 30	Purchase	420	20.8	8736				30	10.8	324
								30	10.8	324
								420	20.8	8736
Oct 5	Sale				340	20.8	7072	30	10.8	324	( sale unit -390 as per Question)-LIFO - adjust 80 unit (420 Purchase - sale 340)
								30	10.8	324
								80	20.8	1664
Oct 26	Purchase	120	25.8	3096				30	10.8	324	A
								30	10.8	324	B
								80	20.8	1664	C
								120	25.8	3096	D
	Total						13548			5408	(Sum of A-D)

Gross margin	FIFO $			LIFO $
	Unit	Rate	Value $	Unit	Rate	Value $
Sale-A	860	40.8	35088	860	40.8	35088
Cost of Goods sold ( as above )-B			20238			13548
Operating Margin(A-B)			14850			21540