Cortez Company sells chairs that are used at computer stations. Its beginning inventory of chairs was 130 units at $60 per unit.

Cortez Company sells chairs that are used at computer stations. Its beginning inventory of chairs was 130 units at $60 per unit. During the year, Cortez made two batch purchases of this chair. The first was a 146-unit purchase at $68 per unit; the second was a 224-unit purchase at $72 per unit. During the period, it sold 292 chairs.

 

Required

Determine the amount of product costs that would be allocated to cost of goods sold and ending inventory, assuming that Cortez uses

a.

FIFO:

b. LIFO:

c. Weighted average:

 

 

Explanation:

CORTEZ COMPANY Inventory Purchases
Beginning inventory	130	@	$60	=	$7,800
First purchase	146	@	68	=	9,928
Second purchase	224	@	72	=	16,128
Goods available for sale	500				$33,856

c.
Total Cost	÷	Total Units	=	Cost per Unit
$ 33,856	÷	500	=	$ 68

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.