Topanga Group began operations early in 2013. Inventory purchase information for
ID: 2468723 • Letter: T
Question
Topanga Group began operations early in 2013. Inventory purchase information for the quarter ended March 31, 2013, for Topanga’s only product is provided below. The unit costs include the cost of freight. The company uses a periodic inventory system. Date of Purchase Units Unit Cost Total Cost Jan. 7 3,000 $ 2.00 $ 6,000 Feb. 16 19,000 3.00 57,000 March 22 23,000 4.00 92,000 Totals 45,000 $ 155,000 Sales for the quarter, all at $7 per unit, totaled 28,000 units leaving 17,000 units on hand at the end of the quarter. Required: 1. Calculate the Topanga's gross profit ratio for the first quarter using the following inventory methods: 2.Comment on the relative effect of LIFO and FIFO inventory methods on the gross profit ratio.
Explanation / Answer
Total Purchase
Cost of Sales under LIFO
23,000 units @ $4 = $92,000
5000 units @ $3 = $15,000
Total = $107,000
Gross Profit = $89,000
Gross Profit ratio = 89,000 / 196,000 = 45.41%
Unit Rate Amount Jan 7 3000 2 6000 Feb 16 19000 3 57000 Mar 22 23000 4 92000Related Questions
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