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Natalie is busy establishing both divisions of her business (cookie classes and mixer sales) and completing her business degree. Her goals for the next 11 months are to sell one mixer per month and to give two to three classes per week. The cost of the fine European mixers is expected to increase. Natalie has just negotiated new terms with Kzinski that include shipping costs in the negotiated purchase price (mixers will be shipped FOB destination). Assume that Natalie has decided to use a periodic inventory system and now must choose a cost flow assumption for her mixer inventory. Inventory as on January 31, 2022 represents three deluxe mixer purchased at a unit cost of $595.

The following transactions occur in February to May 2022.
Feb. 2 Natalie buys two deluxe mixers on account from Kzinski Supply Co. for $1,200 ($600 each), FOB destination, terms n/30.
16 She sells one deluxe mixer for $1,150 cash.
25 She pays the amount owed to Kzinski.
Mar. 2 She buys one deluxe mixer on account from Kzinski Supply Co. for $618, FOB destination, terms n/30.
30 Natalie sells two deluxe mixers for a total of $2,300 cash.
31 She pays the amount owed to Kzinski.
Apr. 1 She buys two deluxe mixers on account from Kzinski Supply Co. for $1,224 ($612 each), FOB destination, terms n/30.
13 She sells three deluxe mixers for a total of $3,450 cash.
30 Natalie pays the amounts owed to Kzinski.
May 4 She buys three deluxe mixers on account from Kzinski Supply Co. for $1,875 ($625 each), FOB destination, terms n/30.
27 She sells one deluxe mixer for $1,150 cash.
Determine the cost of goods available for sale. Cost of goods available for sale.

User Teebs
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1 Answer

4 votes

Answer:

LIFO:

Under LIFO method units purchased last are sold first.

Sold units included all units purchased on May 4, Apr. 1 and Mar. 2 and 1 unit purchased on Feb. 2

Cost of goods sold = 3*625+2*612+1*618+1*600 = $4,317

Ending inventory = Inventory as on January 31, 2014 and 1 unit purchased on Feb. 2 = 1785+600 = $2,385

Gross profit = sales-Cost of goods sold = 8050-4317 = $3,733

Gross profit rate = 3,733/8050 = 46.37%

FIFO:

Under FIFO method units purchased first are sold first.

Sold units included all units of beginning inventory, purchased on Feb 2, Mar 2 and 1 unit from Apr. 1 purchase

Cost of goods sold = 3*595+2*600+1*618+1*612 = $4,215

Ending inventory = 1 unit purchased on Apr 1 and all units of May 4 purchase = 612+1875 = $2,487

Gross profit = sales-Cost of goods sold = 8050-4,215= $3,835

Gross profit rate = 3,835/8050 = 47.64%

Average cost

Average cost per unit = 6702/11 = $609.273

Cost of goods sold = 7*609.273 = $4,264.91

Ending inventory = 4*609.273 = $2,437.09

Gross profit = sales-Cost of goods sold = 8050-4,264.91= $3785.09

Gross profit rate = 3785.09/8050 = 47.02%

Step-by-step explanation:

User Veli Gebrev
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