Question

The following information relates to Hogs Back Falls Ltd's inventory transactions during the month of February Units Cost/Unit Amount Feb. 1 Beginning inventory 7,100 $21.00 $149.100 10 Sale 6,000 14 Purchase 3,900 $22.00 $85,800 18 Purchase 600 $25.00 $15,000 25 Sale 3,600 26 Purchase 4,100 $30.00 $123,000 28 Sale 3,100 All of the units sold were priced at $87.00 per unit. Hogs Back Falls Ltd. uses the perpetual inventory system. Calculate Hogs Back's cost of goods sold, gross margin, and ending inventory for the month of February using FIFO. Cost of Goods Sold $ Gross Margin Ending Inventory $ e Textbook and Media Hogs Back Falls Ltd. uses the perpetual inventory system. Calculate Hogs Back's cost of goods sold, gross margin, and ending inventory for the month of February using weighted average. (Round calculations for cost per unit to 2 decimal places, e.g. 10.52 and final answers to O decimal places, e.g. 61,052.) Cost of Goods Sold $ Gross Margin Ending Inventory $ $ e Textbook and Media Which of the cost formulas would produce the higher gross margin? The method results in the higher gross margin.

Answer 1

ANSWER = 1
FIFO METHOD:
		PURHASES			COST OF GOODS SOLD			ENDING INVENTORY
Date	Particulars	Units	Rate	Total	Units	Rate	Total	Units	Rate	Total
Feb, 01	Beginning inventory							7100	$         21.00	$1,49,100
Feb, 10	Sales				6000	$             21.00	$1,26,000	1100	$         21.00	$23,100
Feb, 14	Purchases	3900	$             22.00	$85,800				1100	$         21.00	$23,100
								3900	$         22.00	$85,800
Feb, 18	Purchases	600	$             25.00	$15,000				1100	$         21.00	$23,100
								3900	$         22.00	$85,800
								600	$         25.00	$15,000
Feb, 25	Sales				1100	$             21.00	$23,100
					2500	$             22.00	$55,000	1400	$         22.00	$30,800
								600	$         25.00	$15,000
Feb, 26	Purchases	4100	$             30.00	$1,23,000				1400	$         22.00	$30,800
								600	$         25.00	$15,000
								4100	$         30.00	$1,23,000
Feb, 28	Sales				1400	$             22.00	$30,800
					600	$             25.00	$15,000
					1100	$             30.00	$33,000	3000	$         30.00	$90,000
		8,600		$2,23,800	12,700		$2,82,900	3000		$90,000
ANSWER: 1
	Cost of Goods Sold	$2,82,900
ANSWER: 2
	Gross Margin
	Sales Value (12,700 Units X $ 87)	11,04,900
	Less: Cost of Goods Slold	$2,82,900
	Gross Margin	$8,22,000
ANSWER: 3
	Ending inventory	90,000
ANSWER = 2
WEIGHTED AVERAGE METHOD
		PURHASES			COST OF GOODS SOLD			ENDING INVENTORY
Date	Particulars	Units	Rate	Total	Units	Rate	Total	Units	Rate	Total
Feb, 01	Beginning inventory							7100	$         21.00	$1,49,100
Feb, 10	Sales				6000	$             21.00	$1,26,000	1100	$         21.00	$23,100
Feb, 14	Purchases	3900	$             22.00	$85,800				5000	$         21.78	$1,08,900
Feb, 18	Purchases	600	$             25.00	$15,000				5600	$         22.13	$1,23,900
Feb, 25	Sales				3600	$             22.13	$79,650	2000	$         22.13	$44,250
Feb, 26	Purchases	4100	$             30.00	$1,23,000				6100	$         27.42	$1,67,250
Feb, 28	Sales				3100	$             27.42	$84,996	3000	$         27.42	$82,254
		8,600		$2,23,800	12,700		$2,90,646	3000		$82,254
ANSWER: 1
	Cost of Goods Sold	$2,90,646
ANSWER: 2
	Gross Margin
	Sales Value (12,700 Units X $ 87)	11,04,900
	Less: Cost of Goods Slold	$2,90,646
	Gross Margin	$8,14,254
ANSWER: 3
	Ending inventory	82,254
ANSWER = 3
	FIFO Method results is higher gross margin