Warnerwoods Company uses a perpetual inventory system. It entered into the follo
ID: 2555779 • Letter: W
Question
Warnerwoods Company uses a perpetual inventory system. It entered into the following purchases and sales transactions for March. Date Mar. 1 Beginning inventory Mar. 5 Purchase Mar. 9 Sales Mar. 18 Purchase Mar. 25 Purchase Mar. 29 Sales 230 unitse $53.60 per unit 290 unitse $58.60 per unit 390 unita $88.60 per unit 150 units $63.60 per unit 280 units 65.60 per unit 260 unitse $98.60 per unit 650 units Totals 950 units 4. Compute gross profit earned by the company for each of the four costing methods. For specific identification, the March 9 sale consisted of 130 units from beginning inventory and 260 units from the March 5 purchase; the March 29 sale consisted of 110 units from the March 18 purchase and 150 units from the March 25 purchase. (Round weighted average cost per unit to two decimals and final answers to neprest whole dollar) Avg. CostSpec. ItD ss Margin Sales Less: Cost of goods sold Gross profit FIFO LIFOExplanation / Answer
Solution:
Gross Margin
FIFO
LIFO
Avg.cost
Spec.ID
Sales (390*88.6 + 260*98.6)
$60,190
$60,190
$60,190
$60,190
Less: Cost of Goods Sold
(Refer Working Notes)
$37,590
$39,410
$38,351
$39,040
Gross Margin
$22,600
$20,780
$21,839
$21,150
Working Note 1 – calculation of cost of goods sold using FIFO – Perpetual Method
Perpetual FIFO:
Goods Purchased
Cost of Goods Sold
Inventory Balance
# of units
Unit Cost
Cost per unit
# of units
Cost per unit
Cost of goods sold
# of units
Cost per unit
Inventory Balance
March.1 Beginning Inventory
$230.00
53.6
$12,328.00
Purchases March.5
290
$58.60
$16,994.00
$230.00
53.6
$12,328.00
$290.00
58.6
$16,994.00
$29,322.00
Sales March.9
230
$53.60
$12,328.00
$0.00
0
$0.00
160
$58.60
$9,376.00
$130.00
58.6
$7,618.00
390
$21,704.00
$7,618.00
Purchases March.18
150
$63.60
$9,540.00
$130.00
58.6
$7,618.00
$150.00
63.6
$9,540.00
$280.00
$17,158.00
Purchases March.25
280
$65.60
$18,368.00
$130.00
58.6
$7,618.00
$150.00
63.6
$9,540.00
$280.00
65.6
$18,368.00
$560.00
$35,526.00
Sales March.29
130
$58.60
$7,618.00
$20.00
63.6
$1,272.00
130
$63.60
$8,268.00
$280.00
65.6
$18,368.00
260
$15,886.00
$300.00
$19,640.00
TOTAL
$37,590.00
Working Note 2 – LIFO Perpetual – Cost of Goods Sold
Perpetual LIFO:
Goods Purchased
Cost of Goods Sold
Inventory Balance
# of units
Unit Cost
Cost per unit
# of units
Cost per unit
Cost of goods sold
# of units
Cost per unit
Inventory Balance
March.1 Beginning Inventory
230
$53.60
$12,328.00
Purchases March.5
290
$58.60
$16,994.00
230
$53.60
$12,328.00
290
$58.60
$16,994.00
$29,322.00
Sales March.9
100
$53.60
$5,360.00
130
$53.60
$6,968.00
290
$58.60
$16,994.00
390
$22,354.00
$6,968.00
Purchases March.18
150
$63.60
$9,540.00
130
$53.60
$6,968.00
150
$63.60
$9,540.00
280
$16,508.00
Purchases March.25
280
$65.60
$18,368.00
130
$53.60
$6,968.00
150
$63.60
$9,540.00
280
$65.60
$18,368.00
560
$34,876.00
Sales March.29
260
$65.60
$17,056.00
130
$53.60
$6,968.00
150
$63.60
$9,540.00
20
$65.60
$1,312.00
300
$17,820.00
TOTAL
$39,410.00
Working Note 3 – Weighted Average – Perpetual – Cost of Goods Sold
Perpetual LIFO:
Goods Purchased
Cost of Goods Sold
Inventory Balance
# of units
Unit Cost
Cost per unit
# of units
Cost per unit
Cost of goods sold
Total Cost of Goods (a)
Total Available Units (b)
Unit Average Cost (a/b)
March.1 Beginning Inventory
$12,328.00
230
$53.60
Purchases March.5
290
$58.60
$16,994.00
$12,328.00
230
$16,994.00
290
$29,322.00
520
$56.39
Sales March.9
390
$56.39
$21,992.10
$7,329.90
130
$56.38
Purchases March.18
150
$63.60
$9,540.00
$7,329.90
130
$9,540.00
150
$16,869.90
280
$60.25
Purchases March.25
280
$65.60
$18,368.00
$16,869.90
280
$18,368.00
280
$35,237.90
560
$62.92
Sales March.29
260
$62.92
$16,359.20
$18,878.70
300
$62.93
TOTAL
$38,351.30
Note 4 --- Cost of Goods Sold – Specific Identification
Cost of Goods Sold:
Units Sold from Beginning Inventory
130
$53.60
$6,968
Units Sold from Purchases March.5
260
$58.60
$15,236
Units Sold from Purchases March.18
110
$63.60
$6,996
Units Sold from Purchases March.20
150
$65.60
$9,840
Total Cost of Goods Sold
650
$39,040
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Gross Margin
FIFO
LIFO
Avg.cost
Spec.ID
Sales (390*88.6 + 260*98.6)
$60,190
$60,190
$60,190
$60,190
Less: Cost of Goods Sold
(Refer Working Notes)
$37,590
$39,410
$38,351
$39,040
Gross Margin
$22,600
$20,780
$21,839
$21,150
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