Question

Cast Iron Grills, Inc., manufactures premium gas barbecue grills. The company uses a periodic inventory system and the LIFO cost method for its grill inventory. Cast Iron's December 31, 2018, fiscal year-end inventory consisted of the following (listed in chronological order of acquisition):

Units	Unit Cost
8,400	$	800
5,700		900
9,400		1,000

The replacement cost of the grills throughout 2019 was $1,100. Cast Iron sold 44,000 grills during 2019. The company's selling price is set at 200% of the current replacement cost.

Required:
1. & 2. Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2019 under two different assumptions. First, that Cast Iron purchased 45,000 units and, second, that Cast Iron purchased 23,500 units during the year.
4. Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2019 assuming that Cast Iron purchased 45,000 units (as per the first assumption) and 23,500 units (as per the second assumption) during the year and uses the FIFO inventory cost method rather than the LIFO method.

Req 1 and 2 Req 4 Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2019 under two different assumptions. First, that Cast Iron purchased 45,000 units and, second, that Cast Iron purchased 23,500 units during the year. (Round "Gross profit ratio" answer to 1 decimal place (i.e., 0.123 needs to be entered as 12.3%.)) Purchased Units Gross Profit Gross Profit Ratio 45,000 23,500

Answer 1

Requirement 1 :

Requirement 4 :

Particulars

Particulars

Sales revenue

(44000*(1100*200%))

$    96,800,000.00

Sales revenue

(44000*(1100*200%))

$    96,800,000.00

Less ; Cost of goods sold

(44000*1100)

$ (48,400,000.00)

Less ; Cost of goods sold

$ (43,800,000.00)

$    48,400,000.00

$    53,000,000.00

Gross profit ratio =

48400000/96800000

50%

Gross profit ratio =

48400000/96800000

54.8%

Requirement 2:

Working note :

Sales revenue

(44000*(1100*200%))

$    96,800,000.00

Cost of goods sold

Less ; Cost of goods sold

$    44,700,000.00

8400*800

6720000

5700*900

5130000

$    52,100,000.00

9400*1000

9400000

Gross profit ratio =

48400000/96800000

53.8%

20500*1100

22550000

Working note :

43800000

Cost of goods sold

23500*1100

25850000

9400*1000

9400000

4)b)

5700*900

5130000

when 23500 units will be purchased

5400*800

4320000

cost of goods sold and gross profit , gross profit ratio will be exactly same as in case of 45000 units of purchase

44700000