Wednesday 4 October 2017

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:

save image


b. LIFO:
save image

c. Weighted average:
 
save image
 
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.  

 save image
Explanation:


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

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. 

 save image
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.