Question

Compute the gross margin for Mason Company using the following cost flow assumptions: (1) FIFO, (2) LIFO, and (3) weighted average?

1) FIFO
2) LIFO
3) Weighted Average

Answer 1

To compute the gross margin for Mason Company, you can use the FIFO, LIFO, and weighted average cost flow assumptions.

Step-by-step explanation:

To compute the gross margin for Mason Company using different cost flow assumptions, you need to understand how each assumption affects the calculation. Gross margin is the difference between net sales and cost of goods sold (COGS). The COGS can be calculated using different cost flow assumptions, such as FIFO, LIFO, and weighted average.

FIFO (First-In, First-Out): This assumes that the oldest inventory is sold first. To calculate the COGS, you would use the cost of the oldest inventory.

LIFO (Last-In, First-Out): This assumes that the newest inventory is sold first. To calculate the COGS, you would use the cost of the newest inventory.

Weighted Average: This assumes that all inventory has the same cost per unit. To calculate the COGS, you would use the weighted average cost per unit, which is calculated by dividing the total cost of inventory by the number of units.