Question

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Indigo Outdoor Stores Inc. uses a perpetual inventory system and has a beginning inventory, as at April 1, of 152 tents. This consists of 50 tents at a cost of $212 each and 102 tents at a cost of $226 each. During April, the company had the following purchases and sales of tents: Purchases Sales Units Unit Cost Units Unit Price Date Apr. 3 $409 75 194 $273 10 17 238 409 24 295 292 30 205 409 Determine the cost of goods sold and the cost of the ending inventory using FIFO. Cost of goods sold Cost of the ending inventory $ UNK Tο ΕXΤ LINK Το TΕXΤ Calculate Indigo Outdoors's gross profit and gross profit margin for the month of April. (Round gross profit margin to 1 decimal place, e.g. 1.2 and gross profit to the nearest whole dollar, e.g. 5,275.) Gross profit Gross profit margin LINK TO TEXT LINK Το τχτ Is the gross profit determined in part (b) higher or lower than it would be if Indigo Outdoors had used the average cost formula? The gross profit is than if the average cost formula had been used in a perpetual inventory system because cost of goods sold is under FIFO in a period of prices than it would be using the average cost formula. Under FIFO, ending inventory is cost of goods sold is and gross profit is LINK TO TEXT LINK TO TEXT

Answer 1

Correct Answer:

Requirement a:

perpetual	FIFO
Cost of Goods Sold	$          136,838.00
Ending Inventory	$            35,916.00

Working:

Cost of Goods Available for sale
		Units	Cost per unit	value
Beginning Inventory	01-Apr	50	$                  212.00	$                 10,600.00
Beginning Inventory	01-Apr	102	$                  226.00	$                 23,052.00
Purchases	10-Apr	194	$                  273.00	$                 52,962.00
Purchases	24-Apr	295	$                  292.00	$                 86,140.00
Total		641		$              172,754.00

Perpetual FIFO
A	Total Units Available for sale			641		$ 172,754.00
	Units Sold			518
	Ending Inventory Units			123
	Valuation
	Cost of Goods Sold		50		$                       212.00	$    10,600.00
			102		$                       226.00	$    23,052.00
			194		$                       273.00	$    52,962.00
			172		$                       292.00	$    50,224.00
						$                   -
						$                   -
B	Cost of Goods Sold		518	units		$ 136,838.00
A-B	Ending Inventory		123	units		$    35,916.00

Requirement 2:

	FIFO
Gross profit	$ 75,024.00
gross profit margin	35.4%

Working:

		FIFO
A	Sales Revenue	$                211,862.00
B	Cost of goods sold	$                136,838.00
C=A-B	Gross profit	$                   75,024.00
D =C/A *100	gross profit margin	35.4%

Sales Revenue = (75+238+205)*409 = $ 211,862.00

Requirement c:

The gross profit is higher than if the weighted average cost formula had been used in a perpetual inventory system because cost of goods sold is Lower under FIFO in a period of Rising prices than it would be using the average cost formula,

Under FIFO, ending inventory is $ 35,916.00, Cost of goods sold is $ 136,838.00, and the Gross profit is $ 75,024.00.

End of answer.

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