how do I determine the gross profit using LIFO please explain. De ACC113Spring 2
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how do I determine the gross profit using LIFO please explain.
De ACC113Spring 2018CRN1051 Purchase c Homework: Chapter 6 Homework Save Sale on Jan HW Score: 35.43%, 0.71 of 2 pts Score: 0.71 of 1 pt P6-33B (book/static) Exercise World began January with merchandise inventory of 90 crates of vitamins that cost a total of $5,850 During 1 of 2 (1 complete),, Purchase o Question Help on Jan the month, Exercise World purchased and sold merchandise on account as follows (click the icon to view the transactions.) Read the requirements LIFO Date Quantity Cost Cost Quantity Cost CostQuantity Cost Cost Date Jan. 1 9065 $ 5,850 901$ 65 $ 5,850 13076 9,880 2 130$76 S 9,880 on on Jan 5 80 S 65 S 5,200 130 S769,880 10 S 65 650 16 170S86 $ 14,620 80S65 S5.200 170 86 $ 14,620 065 S 4550 on Jan 27 17086$14,620 10 $ 65 s 650 $ 25,800 $ 24,500 Totals Determine the company's gross profit using the LIFO inventory costing method Gross profit is $ Enter any number in the edit fields and then click Check Answer. 300 320 70 $4,550 3) Weighted Ave Date Beginning invent Purchase on Jan using the LIFO inventory costing method. Sale on Jan 5 on Jan 18 parts remaining Clear All Check Answer O Type here to searchExplanation / Answer
LIFO is used when there are frequent increases in product cost. Increases in cost of product will result in high cost of goods sold and low gross profit. This method of inventory valuation will also result in lower taxes when compared to other inventory valuation methods.
In the above, 320 crates were sold. Using LIFO, we must look at the last units purchased. This means:
170*86= $14,620
130*76=$9,880
20*65=$1,300 ( 20 units from the beginning inventory of 90 units at a cost of $65)
As we had taken the purchase price, thus the cost of goods sold is: $14,620+9,880+$1,300=$25,800
Ending inventory: (90-20)*65=$4,550
Sales: (140*$100)+(180*104)=$32,720
Gross Profit is calculated as : Sales-Cost of Goods Sold=$32,720-$25800=$6,920
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