Question

Consider the following transactions for Tradex Company.

Purchase:

January 10 units to €25 each

February 15 units to €30 each

April 20 units at €35 each

Sales:

March 15 units to €50 each

May 18 units at €60 each

Calculate the cost of sales and gross profit based on inventory cost method FIFO.

Calculate the cost of sales and gross profit based on the LIFO inventory cost method.

Answer 1

FIFO:
Purchases
	Units	Rate	Total
Jan	10	25	250
Feb	15	30	450
April	15	35	525
	Cost of good sold
	Units	Rate	Total
March	10	25	250
	5	30	150
May	10	30	300
	8	35	280
Total COGS			980
Sales
March	15	50	750
May	18	60	1080
			1830
Cost of good sold			980
Gross profit			Sales - Cost of good sold
			1830 - 980
			850
LIFO:
Cost of good sold	Units	Rate	Total
March	15	30	450
May	18	35	630
Total			1080
Sales as calculated in part above			1830
Cost of good sold			1080
Gross profit			Sales - Cost of good sold
			1830-1080
			750