Question

3. A company made net sales revenue of AED 500,000, and cost of goods sold totaled AED 300,000. Calculate its gross profit percentage to the nearest ong decimal. % 4. A company purchased 500 units for AED 30 each on January 31. It purchased 550 units for AED 33 each on February 28. It sold a total of 650 units for AED 45 each from March 1 through December 31. What is the cost of ending inventory on December 31 if the company uses the first-in, first-out (FIFO) inventory costing method? (Assume that the company uses a perpetual inventory system.) AED

Answer 1

3. Gross Profit = Net Sales - Cost of Goods Sold

= AED 500000 - AED 300000

= AED 200000

Gross Profit Percentage = (Gross Profit/Net Sales)x100

=(200000/500000)x100

= 40 %

4. FIFO method assumes that the oldest products in a company's inventory have been sold first.Means,the earliest goods purchased are the first ones removed from the inventory account.  

Cost of Closing inventory as on 31st December will be AED 13200

FIFO METHOD
Date	Opening Stock			Reciept			Issue			Closing Balance
	Qty	Rate	Value	Qty	Rate	Value	Qty	Rate	Value	Qty		Value
31st Jan	-	-	-	500	30	15,000	-	-	-	500	30	15,000
28th Feb	500	30	15,000	550	33	18,150	-	-	-	500	30	15,000
										550	33	18,150
1st Mar to 31st Dec				-	-	-	500	30	15,000	-	-	-
				-	-	-	150	33	4,950	400	33	13,200