Question

Coronado Company uses a periodic inventory system. Details for the inventory account for the month of January, 2018 are as follows: Units Per unit price Total Balance, 1/1/18 210 $4 $840 Purchase, 1/15/18 120 5.40 648 Purchase, 1/28/18 120 5.60 672 An end of the month (1/31/18) inventory showed that 170 units were on hand. If the company uses FIFO and sells the units for $12 each, what is the gross profit for the month?

Answer 1

the gross profit for the month is $2,142

Step-by-step explanation:

Periodic Inventory System keep record of the Costs of Sales and Inventory balance after a period elapses.

To find the gross profit for the month, we first need to calculate the costs of goods sold using FIFO inventory system. FIFO assumes that the first goods bought by the company are the first to be sold (First In First Out).

Calculation of Cost of Goods Sold :

Units Sold = 210 + 120 + 120 - 170

= 280

Therefore,

210 units × $4 = $840

70 units × $5.40 = $378

Total = $1,218

The next step is to Calculate the Total Sales Revenue made during the period.

Calculation of Total Sales Revenue :

Total Sales Revenue = Units Sold × Selling Price per Unit

= 280 units × $12

= $3,360

Lastly Calculate the Gross Profit

Calculation of Gross Profit :

Gross Profit = Sales - Cost of Sales

= $3,360 - $1,218

= $2,142