You are provided with the following information for Deer Inc. for the month ende

ID: 2388108 • Letter: Y

Question

You are provided with the following information for Deer Inc. for the month ended October 31, 2011. Deer uses a periodic method for inventory.

Date Description Units Unit Cost or Selling Price
Oct 1 Beginning Inventory 60 $25
Oct 9 Purchase 120 26
Oct 11 Sale 100 35
Oct 17 Purchase 70 27
Oct 22 Sale 60 40
Oct 25 Purchase 80 28
Oct 29 Sale 110 40

a.) Under each of the following methods (LIFO,FIFO,Average cost) Calculate i. Ending inventory. ii. cost of goods sold. iii. gross profit. iv. gross profit rate

b. compare results for the three cost flow assumptions

A little confused with this stuff, would appreciate some help. Thank you very much..

Explanation / Answer

a.) Under each of the following methods (LIFO,FIFO,Average cost) Calculate i. Ending inventory. ii. cost of goods sold. iii. gross profit. iv. gross profit rate

(3) Average-cost.

Ending inventory =$ 1500

Cost of goods sold=$ 7250

Gross profit= $ 3050

Gross profit rate = 29.6 %

LIFO

FIFO

Average-cost

ending inventory

60 x 25 = $1,500

60 x 28 = $1,680

60 x 26.515 = $1,591

cost of goods sold

8,750 - 1,680 = 7,070

8,750 - $1,680 = $7,070

270 x $26.515 = $7,159

gross profit

10,300 - $7,070 = $3,230

$10,300 - $7,159 = $3,141

gross profit rate

3,230/10,300 = 31.4%

3,141/10,300 = 30.5%