Question

Bramble Outdoor Stores Inc. uses a perpetual inventory system and has a beginning inventory, as at April 1, of 148 tents. This consists of 51 tents at a cost of $206 each and 97 tents at a cost of $223 each. During April, the company had the following purchases and sales of tents: Sales Purchases Units Unit Cost Date Apr. 3 Units 75 Unit Price $414 202 $271 249 414 287 290 198 414 Determine the cost of goods sold and the cost of the ending inventory using FIFO. Cost of goods sold Cost of the ending inventory LINK TO TEXT LINK TO TEXT Calculate Bramble 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 TO TEXT Is the gross profit determined in part (b) higher or lower than it would be if Bramble 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 cost of goods sold is and gross profit is LINK TO TEXT LINK TO TEXT

Answer 1

Correct Answer:

Requirement 1:

Perpetual	FIFO
Cost of Goods Sold	$          136,759.00
Ending Inventory	$            33,350.00

Working:

Cost of Goods Available for sale
		Units	Cost per unit	value
Beginning Inventory	01-Apr	51	$                  206.00	$                 10,506.00
Beginning Inventory	01-Apr	97	$                  223.00	$                 21,631.00
Purchases	10-Apr	202	$                  271.00	$                 54,742.00
Purchases	24-Apr	287	$                  290.00	$                 83,230.00
Total		637		$              170,109.00

Perpetual FIFO
A	Total Units Available for sale			637		$ 170,109.00
	Units Sold			522
	Ending Inventory Units			115
	Valuation
	Cost of Goods Sold		51		$                       206.00	$    10,506.00
			97		$                       223.00	$    21,631.00
			202		$                       271.00	$    54,742.00
			172		$                       290.00	$    49,880.00
B	Cost of Goods Sold		522	units		$ 136,759.00
A-B	Ending Inventory		115	units		$    33,350.00

Requirement 2:

Perpetual	FIFO
Gross profit	$         79,349.00
gross profit margin	36.7%

Working:

Sales revenue = (75+249+198)*414 = $ 216,108.00

		FIFO
A	Sales Revenue	$                216,108.00
B	Cost of goods sold	$                136,759.00
C =A-B	Gross profit	$                   79,349.00
D=C/A*100	gross profit margin	36.7%

Requirement 3:

The gross profit is Higher than if the 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 $33,350.00, Cost of goods sold is $ 136,759.00 and gross profit is $ 79,349.00

End of answer.

Please give a thumbs-up, it will be highly appreciated.

Thanks.