Question

Given the following? information, calculate the amount by which gross profit would differ between FIFO and? LIFO: Assume the periodic system.

Beginning inventory 1,400 units at $ 52 per unit

Purchases 2,650 units at $ 65 per unit

Units sold 2,200 units at $ 100 per unit

Calculate the cost of goods sold using the FIFO periodic cost flow assumption. FIFO Units x Cost per Unit = Total Cost Units from beginning inventory x = Units from purchase x = Cost of Goods Sold - FIFO method Calculate the cost of goods sold using the LIFO periodic cost flow assumption. ?(Enter 0's for any layers where there were no units? sold.) LIFO Units x Cost per Unit = Total Cost Units from purchase x = Units from beginning inventory x = Cost of Goods Sold - LIFO method

Gross profit would differ between FIFO and LIFO by ?$_____.

Answer 1

Gross profit = sales - cost of goods sold

Gross profit (FIFO)

Sales = 2200*100 =220000

Cost of goods sold (FIFO) = (1400*52)+(800*65)=124800

(In FIFO first units will be taken from beginning inventory and rest from purchase)

Gross profit = 95200

Gross profit (LIFO)

Sales = 220000

Cost of goods sold =(2200*65) =143000

(in LIFO units will be taken from the purchase and then if any required from beginning inventory)

Gross profit = 220000-143000= 77000

Gross profit would differ between FIFO and LIFO by ?$18200 (95200-77000).