Question

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): Units 7,400 5,200 8,400 Unit Cost $ 900 1,000 1,100 The replacement cost of the grills throughout 2022 was $1,200. Cast Iron sold 39,000 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 40,000 units and, second, that Cast Iron purchased 21,000 units during the year. 4. Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2022 assuming that Cast Iron purchased 40,000 units (as per the first assumption) and 21,000 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 40,000 units and, second, that Cast Iron purchased 21,000 units during the year. (Round "Gross profit ratio" answer to 1 decimal place (i.e., 0.123 needs to be entered as 12.3%.)) Purchased Units 40,000 21,000 Gross Profit Gross Profit Ratio $ 46,800,000 50.0 % Req 1 and 2 Req 4 >

Answer 1

1&2)

LIFO - Periodic:

Purchased Units	Gross Profit	Gross Profit Ratio
40,000	$46,800,000	50%
21,000	$59,160,000	63%

Working notes:

LIFO	Cost of Goods Available for Sale			Cost of Goods Sold - Periodic LIFO			Ending Inventory - Periodic LIFO
	# of units (a)	Cost per unit (b)	Cost of Goods available for sale (a*b)	# of Units (c )	Cost per unit (d)	Cost of Goods Sold (c*d)	# of units in ending inventory (e )	Cost per unit (f)	Ending Inventory (e * f)
Beginning Inventory	7,400	$900.00	$6,660,000				7,400	$900	$6,660,000
Beginning Inventory	5200	$1,000	$5,200,000				5200	$1,000	$5,200,000
Beginning Inventory	8,400	$1,100.00	$9,240,000				8,400	$1,100	$9,240,000
Purchase	40,000	$1,200	$48,000,000	39,000	$1,200	$46,800,000
Total	61,000		$69,100,000	39,000		$46,800,000	21,000		$21,100,000

Sales Revenue ($1,200*200/100 = $2,400*39,000 units)	$93,600,000
Less: Cost of Goods Sold	($46,800,000)
Gross Profit	$46,800,000
Gross Profit Ratio ($46,800,000/$93,600,000*100)	50%

LIFO	Cost of Goods Available for Sale			Cost of Goods Sold - Periodic LIFO			Ending Inventory - Periodic LIFO
	# of units (a)	Cost per unit (b)	Cost of Goods available for sale (a*b)	# of Units (c )	Cost per unit (d)	Cost of Goods Sold (c*d)	# of units in ending inventory (e )	Cost per unit (f)	Ending Inventory (e * f)
Beginning Inventory	7,400	$900.00	$6,660,000	4,400	$900	$3,960,000	3,000	$900	$2,700,000
Beginning Inventory	5200	$1,000	$5,200,000	5,200	$1,000	$5,200,000
Beginning Inventory	8,400	$1,100.00	$9,240,000	8,400	$1,100	$9,240,000
Purchase	21,000	$1,200	$25,200,000	21,000	$1,200	$25,200,000
Total	42,000		$46,300,000	39,000		$34,440,000	3,000		$2,700,000

Sales Revenue ($1,200*200/100 = $2,400*39,000 units)	$93,600,000
Less: Cost of Goods Sold	($34,440,000)
Gross Profit	$59,160,000
Gross Profit Ratio ($34,440,000/$93,600,000*100)	63%

4)

FIFO - Periodic:

Purchased Units	Gross Profit	Gross Profit Ratio
40,000	$62,760,000	67%
21,000	$62,760,000	67%

FIFO	Cost of Goods Available for Sale			Cost of Goods Sold - Periodic LIFO			Ending Inventory - Periodic LIFO
	# of units (a)	Cost per unit (b)	Cost of Goods available for sale (a*b)	# of Units (c )	Cost per unit (d)	Cost of Goods Sold (c*d)	# of units in ending inventory (e )	Cost per unit (f)	Ending Inventory (e * f)
Beginning Inventory	7,400	$900.00	$6,660,000	7,400	$900.00	$6,660,000
Beginning Inventory	5200	$1,000	$5,200,000	5200	$1,000	$5,200,000
Beginning Inventory	8,400	$1,100.00	$9,240,000	8,400	$1,100.00	$9,240,000
Purchase	40,000	$1,200	$48,000,000	18,000	$1,200	$21,600,000	22,000	$1,200	$26,400,000
Total	61,000		$69,100,000	39,000		$30,840,000	22,000		$26,400,000

Sales Revenue ($1,200*200/100 = $2,400*39,000 units)	$93,600,000
Less: Cost of Goods Sold	($30,840,000)
Gross Profit	$62,760,000
Gross Profit Ratio ($30,840,000/$93,600,000*100)	67%

FIFO	Cost of Goods Available for Sale			Cost of Goods Sold - Periodic LIFO			Ending Inventory - Periodic LIFO
	# of units (a)	Cost per unit (b)	Cost of Goods available for sale (a*b)	# of Units (c )	Cost per unit (d)	Cost of Goods Sold (c*d)	# of units in ending inventory (e )	Cost per unit (f)	Ending Inventory (e * f)
Beginning Inventory	7,400	$900.00	$6,660,000	7,400	$900	$6,660,000
Beginning Inventory	5200	$1,000	$5,200,000	5,200	$1,000	$5,200,000
Beginning Inventory	8,400	$1,100.00	$9,240,000	8,400	$1,100	$9,240,000
Purchase	21,000	$1,200	$25,200,000	18,000	$1,200	$21,600,000	3,000	$1,200	$3,600,000
Total	42,000		$46,300,000	39,000		$30,840,000	3,000		$3,600,000

Sales Revenue ($1,200*200/100 = $2,400*39,000 units)	$93,600,000
Less: Cost of Goods Sold	($30,840,000)
Gross Profit	$62,760,000
Gross Profit Ratio ($30,840,000/$93,600,000*100)	67%