Cast Iron Grills, Inc., manufactures premium gas barbecue grills. The company us
ID: 2483840 • Letter: C
Question
Cast Iron Grills, Inc., manufactures premium gas barbecue grills. The company uses a periodic inventory system and the LIFO cost method for its grill inventory. Cast Iron's December 31, 2016, fiscal year-end inventory consisted of the following (listed in chronological order of acquisition):
The replacement cost of the grills throughout 2017 was $1,100. Cast Iron sold 38,000 grills during 2017. The company's selling price is set at 200% of the current replacement cost.
Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2017 assuming that Cast Iron purchased 39,000 units during the year.
Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2017 assuming that Cast Iron purchased only 20,500 units during the year. (Round "Gross profit ratio" answer to 1 decimal place (i.e., 0.123 needs to be entered as 12.3%.))
Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2017 assuming that Cast Iron purchased 39,000 units (as per requirement 1) and 20,500 units (as per requirement 2) during the year and uses the FIFO inventory cost method rather than the LIFO method. (Round "Gross profit ratio" answer to 1 decimal place (i.e., 0.123 needs to be entered as 12.3%.))
Cast Iron Grills, Inc., manufactures premium gas barbecue grills. The company uses a periodic inventory system and the LIFO cost method for its grill inventory. Cast Iron's December 31, 2016, fiscal year-end inventory consisted of the following (listed in chronological order of acquisition):
Units Unit Cost 7,200 $800 5,100 900 8,200 1,000Explanation / Answer
1 Gross Profit Sales- Cost of Goods Sold Cost of Goods Sold 38,000 1,100 41,800,000 38,000 41,800,000 Sales 38,000 2,200 83,600,000 Gross Profit (83600000-41800000) = 41,800,000 Gross Profit ratio Gross Profit/ Sales (41800000/83600000) = 50.0% 2 Gross Profit If Purchase only 20500 Cost of Goods Sold Unit Unit Cost Total Value 20,500 1,100 22,550,000 8,200 1,000 8,200,000 5,100 900 4,590,000 4,200 800 3,360,000 38,000 38,700,000 Sales 38,000 2,200 83,600,000 Gross Profit (83600000-38700000) = 44,900,000 Gross Profit ratio Gross Profit/ Sales (44900000/83600000) = 53.7% 4 Gross Profit If Purchase only 39000 units and used FIFO Cost of Goods Sold Unit Unit Cost Total Value 7,200 800 5,760,000 5,100 900 4,590,000 8,200 1,000 8,200,000 17,500 1,100 19,250,000 38,000 37,800,000 Sales 38,000 2,200 83,600,000 Gross Profit (83600000-37800000) = 45,800,000 Gross Profit ratio Gross Profit/ Sales (45800000/83600000) = 54.8% Gross Profit If Purchase only 20500 units and used FIFO Cost of Goods Sold Unit Unit Cost Total Value 7,200 800 5,760,000 5,100 900 4,590,000 8,200 1,000 8,200,000 17,500 1,100 19,250,000 38,000 37,800,000 Sales 38,000 2,200 83,600,000 Gross Profit (83600000-37800000) = 45,800,000 Gross Profit ratio Gross Profit/ Sales (45800000/83600000) = 54.8%
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