Question

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ge rprogress Cost How Method The W rite of them in te during showed - bundan July 26 Purdue Average cost per unit Assume that on unit is sold on July 31 for weighted average cust method $300 (900 ) Determine the report for luy and Gross Profile Ending Inventory First, tout blast in, for word vera -

Answer 1

ANSWER

According to question item K 113 was purchased during the month of July as follows:-

Date		Item K 113	Units	Cost of purchase ($)
July	9	Purchase	1	298
July	17	Purchase	1	300
July	26	Purchase	1	302
Total			3	900

An item K 113 was sold on July 31 for $ 417

1. When goods (closing stock) are valued on FIFO Basis: - Under FIFO method, goods which are bought first are sold first and the goods in closing stock shall be the latest current stock.

Therefore, under FIFO method, Item K 113 sold on 31^st July for $ 417 shall be out of the item purchased on 9^th July for $ 298

1. Gross Profit= Sales – Cost of goods sold

       = $ 417 - $ 298

       = $ 119

2. Closing Stock = Purchase price of items not yet sold

= $ 300 + $ 302

= $ 602

2. When goods (closing stock) are valued on LIFO Basis: - Under LIFO method, goods which are bought last are sold first and the goods in closing stock shall be the oldest stock.

Therefore, under LIFO method, Item K 113 sold on 31^st July for $ 417 shall be out of the item purchased on 26^th July for $ 302

1. Gross Profit= Sales – Cost of goods sold

       = $ 417 - $ 302

       = $ 115

2. Closing Stock = Purchase price of items not yet sold

= $ 298 + $ 300

= $ 598

3. When goods (closing stock) are valued on weighted average cost method Basis: - Under weighted average cost method, the value of closing goods shall be the weighted average cost based on the unit purchase price and quantity in hand.

Weighted average per unit price = $ 900 / 3 units = $ 300

1. Weighted average value of closing stock = $ 300 x 2 units = $ 600

2. Gross Profit = Sales + Closing Stock – Purchase Price

                    = $ 417 + $ 600 - $ 900

                    = $ 117