Question

Hogan Industries had the following inventory transactions occur during 2017: Units Cost/unit Feb. 1, 2017 Purchase 110 $46 Mar. 14, 2017 Purchase 190 $48 May 1, 2017 Purchase 135 $50 The company sold 312 units at $64 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, what is the company’s gross profit using FIFO? (rounded to whole dollars)

Answer 1

The answer is: Gross profit = $2,788

Step-by-step explanation:

• Feb. 1 Purchase 110 units $46 per unit
• March 14 Purchase 190 units $48 per unit
• May 1 Purchase 135 units $ 50 per unit

312 units were sold at $64 per unit, tax rate is 30%

Using FIFO, what is the company's gross profit? We first calculate COGS

Cost of goods sold - 312 units:

• 110 units at $46 per unit = $5,060
• 190 units at $48 per unit = $9,120
• 60 units at $50 per unit = $3,000

Total COGS = $17,180

Income statement for Hogan Industries 2017

Total revenue $19,968

COGS ($17,180)

Gross profit $2,788

Taxes 30% ($836.40)

Net profit $1,951.60