Question

AOTD Inc. had beginning inventory of 5,700 that cost $4.00 each. It purchased an additional 4,000...

AOTD Inc. had beginning inventory of 5,700 that cost $4.00 each. It purchased an additional 4,000 units for $6.00 during the period. AOTD Inc. then sold 4,400 units for $18. If the company recognized gross profit of $51,000 on the sale, what inventory method is AOTD Inc. using? (A 14)

LIFO

FIFO

Weighted Average

There is not enough information to answer this question.

Homework Answers

Answer #1

Correct Answer:

Option: There is not enough information to answer this question.

Working:

Gross profit = $ 51,000  

Sales Revenues = $ 79,200 (4,400 units * $ 18)

Cost of goods sold = Sales revenue – Gross profit.

Cost of goods sold = $ 28,200

We need $ 28,200 of cost of goods sold, in order to earn a gross profit of $ 51,000

Therefore, whichever method is resulting in cost of goods sold equal to $ 28,200, AOTD Inc. must be using that method.

But no method is giving cost of goods sold equal to $ 28,200

FIFO

Cost of Goods Sold

4400

*

$                4.00

=

$              17,600

LIFO

Cost of Goods Sold

4000

*

$                6.00

=

$              24,000

400

*

$                4.00

=

$                1,600

Total Cost of Goods Sold

4400

units

$              25,600

Weighted Average Cost Per unit

Units

(A)

9700

Total Cost

(B)

$    46,800

Average Cost

(C=B/A)

$         4.82

Average cost

Cost of Goods Sold

4400

*

$            4.82

=

$              21,229

End of answer.

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