Question

Warnerwoods Company uses a perpetual inventory system. It entered into the following purchases and sales transactions for March.

Date

Activities

Units Acquired at Cost

Units Sold at Retail

Mar.

1

Beginning inventory

160

units

@ $52.20 per unit

Mar.

5

Purchase

255

units

@ $57.20 per unit

Mar.

9

Sales

320

units

@ $87.20 per unit

Mar.

18

Purchase

115

units

@ $62.20 per unit

Mar.

25

Purchase

210

units

@ $64.20 per unit

Mar.

29

Sales

190

units

@ $97.20 per unit

Totals

740

units

510

units

Compute gross profit earned by the company for each of the four costing methods. For specific identification, the March 9 sale consisted of 95 units from beginning inventory and 225 units from the March 5 purchase; the March 29 sale consisted of 75 units from the March 18 purchase and 115 units from the March 25 purchase. (Round weighted average cost per unit to two decimals and final answers to nearest whole dollar.)

	Gross Margin FIFO LIFO Avg. Cost Spec. ID Sales Less: Cost of goods sold Gross profit

Answer 1

FIFO Method

Date	Goods Purchased	Cost of goods sold	Inventory balance
Qty	Cost per unit	Total cost	Qty	cost per unit	total cost	Qty	Cost per unit	Total cost
March 1							160	$52.20	$8,352
March 5	255	$57.20	$14,586				160 255	$52.20 $57.20	$8,352 $14,586
March 9				160 160	$52.20 $57.20	$8,352 $9,152	95	$57.20	$5,434
March 18	115	$62.20	$7,153				95 115	$57.20 $62.20	$5,434 $7,153
March 25	210	$64.20	$13,482				95 115 210	$57.20 $62.20 $64.20	$5,434 $7,153 $13,482
March 28				95 95	$57.20 $62.20	$5,434 $5,909	20 210	$62.20 $64.20	$1,244 $13,482
						$28,847			$14,726

LIFO method

Date	Goods Purchased	Cost of goods sold	Inventory balance
Qty	Cost per unit	Total cost	Qty	Cost per unit	Total cost	Qty	Cost per unit	Total cost
March 1							160	$52.20	$8,352
March 5	255	$57.20	$14,586				160 255	$52.20 $57.20	$8,352 $14,586
March 9				255 65	$57.20 $52.20	$14,586 $3,393	95	$52.20	$4,959
March 18	115	$62.20	$7,153				95 115	$52.20 $62.20	$4,959 $7,153
March 25	210	$64.20	$13,482				95 115 210	$52.20 $62.20 $64.20	$4,959 $7,153 $13,482
March 29				190	$64.20	$12,198	95 115 20	$52.20 $62.20 $64.20	$4,959 $7,153 $1,284
						$30,117			$13,396

Average cost method

Date	Goods Purchased	Cost of goods sold	Inventory balance
Qty	Cost per unit	Total cost	Qty	Cost per unit	Total cost	Qty	Cost per unit	Total cost
March 1							160	$52.20	$8,352
March 5	255	$57.20	$14,586				415	$55.27	$22,938
March 9				320	$55.27	$17,687	95	$55.27	$5,251
March 18	115	$62.20	$7,153				210	$59.06	$12,404
March 25	210	$64.20	$13,482				420	$61.64	$25,886
March 29				190	$61.64	$11,709	230	$61.64	$14,177
						$29,396			$14,177

Specific identification method

Date	Goods Purchased	Cost of goods sold	Inventory balance
Qty	cost per unit	Total cost	Qty	Cost per unit	Total cost	Qty	Cost per unit	Total cost
March 1							160	$52.20	$8,352
March 5	255	$57.20	$14,586				160 255	$52.20 $57.20	$8,352 $14,586
March 9				95 225	$52.20 $57.20	$4,959 $12,870	65 30	$52.20 $57.20	$3,393 $1,716
March 18	115	$62.20	$7,153				65 30 115	$52.20 $57.20 $62.20	$3,393 $1,716 $7,153
March 25	210	$64.20	$13,482				65 30 115 210	$52.20 $57.20 $62.20 $64.20	$3,393 $1,716 $7,153 $13,482
March 29				75 115	$62.20 $64.20	$4,665 $7,383	65 30 40 95	$52.20 $57.20 $62.20 $64.20	$3,393 $1,716 $2,488 $6,099
						$29,877			$13,696

	FIFO	LIFO	Average cost	Specific identification
Sales	$46,372	$46,372	$46,372	$47,372
Cost of goods sold	$28,847	$30,117	$29,396	$29,877
Gross profit	$17,525	$16,195	$16,976	$16,495