Question

Saddlery Company sells leather saddles and equipment for horse enthusiasts. Saddlery uses the periodic inventory system. The following schedule relates to the company's inventory for the month of May: Cost Sales $54,000 $46,800 May 1 5 9 13 Beginning inventory Sale Purchase Purchase Sale Sale Purchase 90 units 60 units 30 units 120 units 120 units 30 units 45 units $19,800 $86,400 24 $100,800 $28,800 27 30 $35,640 (al) Calculate Saddlery Company's cost of goods sold, gross margin, and ending inventory using FIFO. Cost of goods sold Gross margin Ending Inventory

Answer 1

Date	Particulars	Units	Cost	Cost per unit [ Cost / Units ]
May 1	Beginning inventory	90	54000	600
May 9	Purchase	30	19800	660
May 13	Purchase	120	86400	720
May 30	Purchase	45	35640	792
	Goods available for sale	285	195840

Total units sold = 60 + 120 + 30	210
Ending inventory units = Units available for sale - Total units sold = 285 - 210	75

FIFO method: In this method those goods are sold first which are purchased first and the ending inventory is from recent purchases
Ending inventory = ( 45 * 792 ) + ( 30 * 720 )	57240
Cost of goods sold = Cost of goods available for sale - Ending inventory = 195840 - 57240	138600
Sales = 46800 + 100800 + 28800	176400
Gross margin = Sales - Cost of goods sold = 176400 - 138600	37800