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During the year, Trombley Incorporated has the following inventory transactions.
Date Transaction Number
of Units Unit
Cost Total Cost
Jan. 1 Beginning inventory 11 $13 $ 143
Mar. 4 Purchase 16 12 192
Jun. 9 Purchase 21 11 231
Nov. 11 Purchase 21 9 189
69 $ 755
For the entire year, the company sells 51 units of inventory for $21 each.
A: Using FIFO, calculate ending inventory, cost of goods sold, sales revenue, and gross profit.
B:Using LIFO, calculate ending inventory, cost of goods sold, sales revenue, and gross profit
C:Using weighted-average cost, calculate ending inventory, cost of goods sold, sales revenue, and gross profit. (Round "Weighted-Average Cost per unit" to 2 decimal places.)
D: Which method will result in higher profitability when inventory costs are declining?

Respuesta :

Zviko

Answer:

a. Ending inventory = $162, Cost of Sales = $593, Gross Profit = $478

b. Ending inventory = $227, Cost of Sales = $528, Gross Profit = $543

c. Ending inventory = $492.30, Cost of Sales = $557.94 , Gross Profit = $513.06

d. FIFO

Explanation:

FIFO

Ending inventory = 18 units × $9   = $162

                                Total               = $162

Cost of Sales = 11 units × $13 = $143

                         16 units × $12= $192

                         21 units × $11 = $231

                           3 units × $9 = $27

                         Total              = $593

Gross Profit = Sales less Cost of Sales

                   = (51 units × $21) - $593

                   = $1,071 - $593

                   = $478

LIFO

Ending inventory = 11 units × $13    = $143

                                 7 units × $12   =  $84

                                 Total               = $227

Cost of Sales = 9 units × $12 = $108

                         21 units × $11 = $231

                         21 units × $9 = $189

                         Total              = $528

Gross Profit = Sales less Cost of Sales

                   = (51 units × $21) - $528

                   = $1,071 - $528

                   = $543

Weighted-average cost

First determine the average cost.

Average cost = Total Cost / Total units

                      = $ 755 / 69

                      = $10.94

Ending inventory = Units Remaining × Average Price

                             = 45 units × $10.94

                             = $492.30

Cost of Sales = Units Sold × Average Cost

                      = 51 units × $10.94

                      = $557.94

Gross Profit = Sales less Cost of Sales

                   = (51 units × $21) - $557.94

                   = $1,071.00 - $557.94

                   = $513.06

anthougo

The computations are as follows:

                                          FIFO               LIFO         Weighted-Average

                                           A.                     B.                       C.

Ending inventory            $162              $227                $196.92

Sales Revenue              $1,071             $1,071             $1,071.00

Cost of goods sold         $593              $528                $557.94

Gross profit                     $478              $543                $513.06

D. The LIFO (Last-in, First-out) method gives the higher profitability during periods of declining inventory costs.

Data and Calculations:

Date      Transaction              Number  of Units   Unit  Cost  Total Cost

Jan. 1     Beginning inventory              11               $13               $ 143

Mar. 4    Purchase                               16                 12                  192

Jun. 9    Purchase                               21                 11                   231

Nov. 11   Purchase                               21                 9                   189

Total                                                    69                                  $ 755

Average cost per unit = $10.94 ($755/69)

Sales unit = 51 units

Sales Revenue = $1,071 ($21 x 51)

Ending inventory = 18 (69 - 51) units

Cost of goods sold = Cost of goods available for sale - Ending Inventory

FIFO:

Ending inventory cost = $162 (18 x $9)

Cost of goods sold = $593 ($755 - $162)

LIFO:

Ending inventory cost = $227 (11 x $13 + 7 x $12)

Cost of goods sold = $528 ($755 - $227)

WEIGHTED-AVERAGE COST:

Ending inventory cost = $196.92 (18 x $10.94)

Cost of goods sold = $557.94 (51 x $10.94)

Thus, the LIFO method gives a higher gross profit because reduced unit costs of inventory are applied to cost of goods sold.

Learn more: https://brainly.com/question/18107849

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