Question

Three identical units of merchandise were purchased during July, as follows: Date Product Basic H Units Cost July 3 Purchase 1 $35 10 Purchase 1 36 24 Purchase 1 37 Total 3 $108 Average cost per unit $36 Assume one unit sells on July 28 for $45. Determine the gross profit, cost of merchandise sold, and ending inventory on July 31 using the (a) first-in, first-out, (b) last-in, first-out, and (c) average cost flow methods.

Answer 1

Answer and Explanation:

The computation is shown below:

Particulars Gross profit Cost of merchandise sold Ending inventory

a. FIFO $10 $35 $73

($45 - $35) ($108 - $35)

It takes the first cost per unit

b. LIFO $8 $37 $71

($45 - $37) ($108 - $37)

It takes the last cost per unit

c. Average cost $9 $36 $72

($45 - $36) ($45 - $36)

It takes the average cost per unit