Effie Company uses a periodic inventory system. Details for the inventory accoun

Question

Effie Company uses a periodic inventory system. Details for the inventory account for the month of January, 2013 are as follows:

An end of the month (1/31/13) inventory showed that 140 units were on hand. If the company uses FIFO and sells the units for $10 each, what is the gross profit for the month?

a. 1220

b. 1282

c. 1838

4. 1900

                    Units                     Per unit price                     Total Balance, 1/1/13                     200                     $5.00 $1,000 Purchase, 1/15/13                     100                       5.30 530 Purchase, 1/28/13                     100                       5.50 550

Explanation / Answer

units sold = 400 - 140 = 260

buy price is 200 * 5 + 60 * 5.3 = 1318

sell price is 260 * 10 = 2600

profit = 2600 - 1318 = 1282

Hence b. 1282

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