The following three identical units of Item Alpha are purchased during April: Item Alpha Units Cost Apr. Purchase $66 14 Purchase 1 70 28 Purchase 74 Total 3 $210 Average cost per unit $70 ($210 ÷ 3 units) Assume that one unit is sold on April 30 for $88. Determine the gross profit for April and ending inventory on April 30 using the (a) first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) weighted average cost methods.
The following three identical units of Item Alpha are purchased during April: Item Alpha Units Cost Apr. Purchase $66 14 Purchase 1 70 28 Purchase 74 Total 3 $210 Average cost per unit $70 ($210 ÷ 3 units) Assume that one unit is sold on April 30 for $88. Determine the gross profit for April and ending inventory on April 30 using the (a) first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) weighted average cost methods.
Financial Accounting
15th Edition
ISBN:9781337272124
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Carl Warren, James M. Reeve, Jonathan Duchac
Chapter7: Inventories
Section: Chapter Questions
Problem 1PEA: The following three identical units of Item A are purchased during April: Assume that one unit is...
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![Cost Flow Methods
The following three identical units of Item Alpha are purchased during April:
Item Alpha
Units
Cost
Apr.
Purchase
$66
14
Purchase
1
70
28
Purchase
1
74
Total
3
$210
Average cost per unit
$70 ($210 ÷ 3 units)
Assume that one unit is sold on April 30 for $88.
Determine the gross profit for April and ending inventory on April 30 using the (a)
first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) weighted average cost
methods.
Gross Profit
Ending Inventory
a. First-in, first-out (FIFO)
$4
22
$4
144 V
b. Last-in, first-out (LIFO)
$4
14
$4
126 X
c. Weighted average cost
$4
18
130 x
Feedback
▼ Check My Work
a. Sales - cost of merchandise sold = gross profit. FIFO means that the first
units purchased are assumed to be the first to be sold. Therefore, ending
inventory is made up of the most recent purchases.
b. Sales - cost of merchandise sold = gross profit. LIFO means the last units
purchased are assumed to be the first to be sold. Therefore, ending inventory
is made up of the first purchases.
c. Sales - cost of merchandise sold = gross profit. Average cost means the
average cost of all available units purchased is applied to the number of units
sold and in ending inventory.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9557ab66-16b0-4733-a12e-96bc38d558c3%2F02cfddd3-7d96-4eaf-8156-da0cdc40c602%2Fb76kli_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Cost Flow Methods
The following three identical units of Item Alpha are purchased during April:
Item Alpha
Units
Cost
Apr.
Purchase
$66
14
Purchase
1
70
28
Purchase
1
74
Total
3
$210
Average cost per unit
$70 ($210 ÷ 3 units)
Assume that one unit is sold on April 30 for $88.
Determine the gross profit for April and ending inventory on April 30 using the (a)
first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) weighted average cost
methods.
Gross Profit
Ending Inventory
a. First-in, first-out (FIFO)
$4
22
$4
144 V
b. Last-in, first-out (LIFO)
$4
14
$4
126 X
c. Weighted average cost
$4
18
130 x
Feedback
▼ Check My Work
a. Sales - cost of merchandise sold = gross profit. FIFO means that the first
units purchased are assumed to be the first to be sold. Therefore, ending
inventory is made up of the most recent purchases.
b. Sales - cost of merchandise sold = gross profit. LIFO means the last units
purchased are assumed to be the first to be sold. Therefore, ending inventory
is made up of the first purchases.
c. Sales - cost of merchandise sold = gross profit. Average cost means the
average cost of all available units purchased is applied to the number of units
sold and in ending inventory.
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