Question

At the beginning of the current period, Muebles de Pavo Real, a furniture company out of Madrid, Spain, had the following data referring to its inventory at the end of March. They use the FIFO method for costing. They sold 1800 chairs: 300 of type A and 1000 of Type B and 500 of type C. They apply the lower of cost or market to the total inventory. Determine the cost of goods sold. Remember write-downs of inventory are included in the COGS.

Cost/purchases	Type A	Type B	Type C
March 1—Beginning Inventory	200- € 200 each	800 - € 50 each	250 - € 100 each
March 10—purchases	10 - € 205 each	200 - € 45 each	125 - € 102 each
March 15—purchases		100 - € 52 each	250- € 106 each
March 20—purchases	90 - € 210 each		100 - € 110 each
March 25—purchases	150- € 205 each	175 - € 55 each
March 30—purchases	50 - € 207 each	450 - € 50 each

Market for chairs at end of March

Type A	Type B	Type C
€ 202	€ 53	€ 90

Sales:

Type A:                                 Type B:                                 Type C:

190 @ € 340                         500 @ € 75                           500 @ € 175

100 @ € 360                         400 @ € 80

10 @ € 365                           100 @ € 90             

Cost using FIFO (10 points)

Type A       

Type B       

Type C                                                                                Total:  

Value of ending inventory (5 points)

FIFO:  

Market  

Adjustment:                                                                        Value of ending Inventory:  

Gross Profit Margin: (10 points)  

Answer 1

Under FIFO method, the units purchased first are sold out first
Costs of Goods Sold		Type A
Sales			Cost of Goods Sold				Ending Inventory
Units Sold	Price	Total Sales	Units Purchased on	Units	Cost per unit	Total	Cost	units	Inventory Bal
190	340	64600	March 1`	190	200	38,000	10	200	2,000
							10	205	2,050
							90	210	18,900
							150	205	30,750
							50	207	10,350
100	360	36000	March 1`	10	200	2,000	10	210	2,100
			March 10`	10	205	2,050	150	205	30,750
			March 20`	80	210	16,800	50	207	10,350
10	365	3650	March 20`	10	210	2,100	150	205	30,750
							50	207	10,350
Total Cost of Goods Sold						60,950
Costs of Goods Sold		Type B
Sales			Cost of Goods Sold				Ending Inventory
Units Sold	Price	Total Sales	Units Purchased on	Units	Cost per unit	Total	Cost	units	Inventory Bal
500	75	37500	March 1`	500	50	25,000	300	50	15,000
							200	45	9,000
							100	52	5,200
							175	55	9,625
							450	50	22,500
400	80	32000	March 1`	300	50	15,000	100	45	4,500
			March 10`	100	45	4,500	100	52	5,200
							175	55	9,625
							450	50	22,500
100	90	9000	March 10`	100	45	4,500	100	52	5,200
							175	55	9,625
							450	50	22,500
Total Cost of Goods Sold						49,000
Costs of Goods Sold		Type C
Sales			Cost of Goods Sold				Ending Inventory
Units Sold	Price	Total Sales	Units Purchased on	Units	Cost per unit	Total	Cost	units	Inventory Bal
500	175	87500	March 1`	250	100	25,000	125	106	13,250
			March 10`	125	102	12,750	100	110	11,000
			March 10`	125	106	13,250
Total Cost of Goods Sold						51,000
Cost of Goods Sold=		60950+49000+51000
		160,950
Ending Inventory FIFO	=
	Units	Price	Inventory
Type A	150	205	30,750
	50	207	10,350
As market price is lower than the cost of units purchased
Ending Inventory	Total Units * Market Price
	200*202
Ending Inventory	40400
Type B	100	52	5,200
	175	55	9,625
	450	50	22,500
	725
Ending Inventory	725*53
	38425
Type B	225units @ 90
	20250