The following information pertains to Mason Company for 2016:

The following information pertains to Mason Company for 2016:

Beginning inventory	132	units	@	$	38
Units purchased	390	units	@	$	57

Ending inventory consisted of 50 units. Mason sold 472 units at $114 each. All purchases and sales were made with cash. Operating expenses amounted to $3,675.

Required

a.

Compute the gross margin for Mason Company using the following cost flow assumptions: (1) FIFO, (2) LIFO, and (3) weighted average.

 

Explanation:

Mason Company
FIFO
Sales (472 @ $114)											$	53,808
Cost of goods sold:
From beginning inv.	132	units		@	$ 38		=	$	5,016
From purchases	340	units		@	$ 57		=		19,380			(24,396	)
Gross margin											$	29,412
LIFO
Sales (472 @ $114)											$	53,808
Cost of goods sold:
From purchases	390	units		@	$ 57		=	$	22,230
From beg. inv.	82	units		@	$ 38		=		3,116			(25,346	)
Gross margin											$	28,462
Weighted average
Sales (472 @ $114)											$	53,808
Cost of goods sold:
Average cost per unit	472	units	@	$	52.1951		=	$	24,6362			(24,636	)
Gross margin											$	29,172

1Total cost $5,016 + $22,230 = $27,246 ÷ Total units 522 = $52.195 Cost per unit

2Rounded to the next highest whole dollar.

 b. What is the amount of net income using FIFO, LIFO, and weighted average? (Ignore income tax considerations.)

 

Explanation:

	FIFO				LIFO				Weighted Avg.
Sales	$	53,808			$	53,808			$	53,808
Cost of goods Sold		(24,396	)			(25,346	)			(24,636	)
Gross margin		29,412				28,462				29,172
Operating expenses		3,675				3,675				3,675
Net income	$	25,737			$	24,787			$	25,497

c. Compute the amount of ending inventory using (1) FIFO, (2) LIFO, and (3) weighted average. 

 

Explanation:

Ending Inventory
FIFO	50 @ $57		$	2,850
LIFO	50 @ $38			1,900
Weighted average	50 @ $52.195			2,610*

*rounded to the nearest whole dollar.