Question

Check my work Cast Iron Grills, Inc., manufactures premium gas barbecue grills. The company reports inventory and cost of goods sold based on calculations from a LIFO periodic inventory system. Cast Iron's December 31, 2021, fiscal year-end inventory consisted of the following (listed in chronological order of acquisition): points Units 9,000 6,000 10,000 Unit Cost $500 600 700 eBook Print The replacement cost of the grills throughout 2022 was $800. Cast Iron sold 47,000 grills during 2022. 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 2022 under two different assumptions. First, that Cast Iron purchased 48,000 units and, second, that Cast Iron purchased 25.000 units during the vear. 4. Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2022 assuming that Cast Iron purchased 48,000 units (as per the first assumption) and 25,000 units (as per the second assumption) during the year and uses the FIFO inventory cost method rather than the LIFO method. Complete this question by entering your answers in the tabs below. Req 1 and 2 Reg 4 Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2022 under two different assumptions. First, that Cast Iron purchased 48,000 units and, second, that Cast Iron purchased 25,000 units during the year. (Round "Gross profit ratio" answer to 1 decimal place (i.e., 0.123 needs to be entered as 12.3%.))

Answer 1

1.LIFO method states that inventory purchased later will be sold first

Gross Profit = Sales – Cost of goods sold

= 47,000*1,600 – 47,000*800 = 37,600,000

Gross Profit Ratio = Gross Profit/Sales

=50%

Purchased 25,000 units

2.Gross Profit = 47,000*1,600 – (25,000*800+10,000*700 + 6000*600 + 6000*500)

= $41,600,000

Gross profit ratio = 41,600,000/75,200,000

= 55.32%

3.Since When the number of units purchased is lower than units sold, the extra units will be sold from beginning inventory purchased at lower cost

4.FIFO method states that inventory purchased first will be sold first

Gross Profit = 47,000*1,600 – (9000*500+6000*600+10,000*700+22000*800)

= $42,500,000

Gross profit ratio = 42,500,000/75,200,000 = 56.52%

Same answer for both cases

5.Since beginning inventory is considered under both cases