Question

The following scenario applies to the next three questions. At the start of the current period, Alberich Jewelers had an inventory of three identical gold rings. The cost of the gold ring purchased first is $640, the gold ring purchased next had a cost of $720, and the most recent purchase had a cost of $750. During the current period one of the gold rings was sold for $1,400. Alberich expects this gold ring will be a fast seller and he is thinking about ordering more of the same model for $780 each. If Alberich elects the FIFO method of inventory, after selling one ring for $1,400, compute the gross profit he should report. Post your response without any special characters. So an answer of $1,000 would be expressed as 1000

Answer 1

Alberich Jewelers

The gross profit that Alberich should report is 760.

Step-by-step explanation:

a) Data and Calculations:

Cost of gold ring purchased first = $640

Cost of gold ring purchased next = $720

Cost of gold ring purchased recently = $750

Sale of one gold ring = $1,400

Using the FIFO method of inventory, the gross profit for the gold ring sold is based on the first gold ring purchased, as follows:

= Sales Revenue - FIFO cost of inventory

= $1,400 - $640

= $760