Required information The following information applies to the questions displaye

Question

Required information The following information applies to the questions displayed below. The Shirt Shop had the following transactions for T-shirts for Year 1, its first year of operations: Jan. 20 Purchased 500 units 7 3,500 Apr. 21 Purchased 300 units 9 2,700 July 25 Purchased 380 units e 12 4,560 sept. 19 Purchased 190 units e $ 14- 2,660 During the year, The Shirt Shop sold 1,110 T-shirts for $23 each. c. Compute the difference in gross margin between the FIFO and LIFO cost flow assumptions. rence in gross margin between the FIFO and LIFO cost flow assumptions

Explanation / Answer

Cost of Goods Sold(COGS) in FIFO :-

Cost of Goods Sold(COGS) in LIFO :-

Gross Margin = Sales - Cost of Goods Sold

in FIFO = (1110*$23) - $9920 = $15610

in LIFO = (1110*23) - $11600 = $13930

Difference in Gross Margin :-

Receipts Units Rate Amount COGS Unit Rate Amount Balance Unit Rate Amount 500 $7 $3500 500 $7 $3500 300 $9 $2700 300 $9 $2700 380 $12 $4560 310 $12 $3720 70 $12 $840 190 $14 $2660 190 $14 $2660 Total $9920 1

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