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: 

Answer 1

cost using fifo method is

for type A

quantity	cost	amount
200	200	40000
10	205	2050
90	210	18900
		60950

  for type b

quantity	cost	amount
800	50	40000
100	45	4500
100	45	4500
		49000

for type c

quantity	cost	amount
250	100	25000
125	102	12750
125	106	13250
		51000

TOTAL COST IS 60950+49000+51000=160950

TOTAL SALE VALUE FOR TYPE A ,B, C IS 104250+78500+87500=270250

GROSS PROFIT IS 109300 AND GP % IS 40.44% (109300/270250*100)

VALUE OF ENDING INVENTORY IS

TYPE A	TYPE B	TYPE C
150*205=30750	100*52=5200	125*106=13250
50*207=10350	175*55=9626	100*110=11000
	450*50=22500
total qty=200	total qty is 725	total qty is 225
total cost is 51450	total cost is 37325	total cost is 24250

cost at market rate and FIFO and differences

type	quantity	market rate	FIFO	difference	cost
A	200	200*202=40400	51450	11050	40400
B	725	725*53=38425	37325	1100	37325
C	225	225*90=20250	24250	4000	20250
		119325	113025		97975

AS PER ACCOUNTING CONCEPT INVENTORY SHOULD BE VALUED AT COST ARE NET REALISABLE WHICH EVER IS LOWER SO OVER ALL ENDING INVENTORY IS VALUE IS 97975

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