requirea intormation Problem 6-1A Perpetual: Alternative cost flows LO P1 IThe f

Question

requirea intormation Problem 6-1A Perpetual: Alternative cost flows LO P1 IThe following information applies to the questions displayed below] Warnerwoods Company uses a perpetual inventory system. It entered into the following purchases and sales transactions for March. Activities Units Sold at Retail Units Acquired at Cost 200 units $53.00 per unit 275 units$58.00 per unit Date Mar. 1 Beginning inventory Mar. 5 Purchase Mar. 9 Sales Mar. 18 Purchase Mar. 25 Purchase Mar. 29 Sales 360 units g $88.00 per unit 135 units $63.e0 per unit 250 units @ $65.00 per unit 230 units $98.00 per unit 590 units Totals 860 units Problem 6-1A Part 4 4. Compute gross profit earned by the company for each of the four costing methods. For specific identification, the March 9 sale consisted of 115 units from beginning inventory and 245 units from the March 5 purchase; the March 29 sale consisted of 95 units from the March 18 purchase and 135 units from the March 25 purchase. (Round weighted average cost per unit to two decimals and final answers to nearest whole dollar.) Avg. CostSpec ID Margin FIFO LIFO Sales Less: Cost of goods sold Gross profit

Explanation / Answer

1. Sales value would be remain same in all mehods. Sales Value : Date Units Rate Sales Value Mar. 9 360 88          31,680 Mar. 29 230 98          22,540 590          54,220 2. COGS would be as below for different methods- FIFO For Mar. 9 Out of 360 units, 200 units from March 1 and 160 units from March 5 purchase Mar. 29 Out of 230 units, 115 units (275-160) units from March 1 and 115 units from March 18 purchase Date Units Rate Sales Value Mar. 1 200 53          10,600 Mar. 5 160 58            9,280 Mar. 5 115 58            6,670 Mar. 18 115 63            7,245 590          33,795 LIFO For Mar. 9 Out of 360 units, 275 units from March 5 and 85 units from March 1 Mar. 29 Out of 230 units, 230 units from March 25 purchase Date Units Rate Sales Value Mar. 1 85 53            4,505 Mar. 5 275 58          15,950 Mar. 25 230 65          14,950 590          35,405 Average cost Inward Outward Closing Date Units Cost Total Value Units Cost Total Value Units (A) Total Value (B) Average Cost (B/A) Mar. 1 200 53 10600 0 0 0 200 10600 53 Mar. 5 275 58 15950 0 0 0 475 26550 55.89 Mar. 9 0 0 0 360 88 31680 115 6427.9 55.89 (55.89*115) Mar. 18 135 63 8505 0 0 0 250 14932.9 59.73 Mar. 25 250 65 16250 0 0 0 500 31182.9 62.37 Mar. 29 0 0 0 230 98 22540 270 16838.76 62.37 (270*62.36) So, COGS is - Date Units Rate COGS Mar. 9 360 55.89          20,122 Mar. 29 230 62.37          14,344 590          34,466 Specific ID For Mar. 9 Out of 360 units, 115 units from March 1 and 245 units from March 5 purchase Mar. 29 Out of 230 units, 95 units from March 18 and 135 units from March 25 purchase Date Units Rate Sales Value Mar. 1 115 53            6,095 Mar. 5 245 58          14,210 Mar. 18 95 63            5,985 Mar. 25 135 65            8,775 590          35,065 So, Gross Margin Table Gross Margin FIFO LIFO Avg. Cost Specific ID Sales      54,220      54,220          54,220         54,220 Less : COGS      33,795      35,405          34,466         35,065 Gross profit      20,425      18,815          19,754         19,155

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