Part 3: The Warnerwood Company The Warnerwood Company uses a perpetual inventory
ID: 2427927 • Letter: P
Question
Part 3: The Warnerwood Company
The Warnerwood Company uses a perpetual inventory system. It entered the following purchases and sales transactions for March into the system:
Date
Activities
Units Acquired at Cost
Cost per Unit
Units Sold at Retail
Price per unit
March 1
Beginning inventory
100 units
$50
March 5
Purchase
400 units
$55
March 9
Sales
420
$85
March 18
Purchase
120 units
$60
March 25
Purchase
200 units
$62
March 29
Sales
160 units
$95
Totals
820 units
580 units
Instructions:
Show all of your work in an Excel spreadsheet for the following tasks:
Compute the number of units available for sale.
Compute the number of units in ending inventory.
Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, and (c) weighted average. (Round the average cost per unit to 2 decimal places.)
Compute the gross profit earned by the company for each of the three costing methods. (Round the average cost per unit to 2 decimal places.)
Date
Activities
Units Acquired at Cost
Cost per Unit
Units Sold at Retail
Price per unit
March 1
Beginning inventory
100 units
$50
March 5
Purchase
400 units
$55
March 9
Sales
420
$85
March 18
Purchase
120 units
$60
March 25
Purchase
200 units
$62
March 29
Sales
160 units
$95
Totals
820 units
580 units
Explanation / Answer
Compute the number of units available for sale during march = 100 + 400 + 120 + 200 = 820 units
Compute the number of units in ending inventory = Total units available 820 - units sold 580 = 240 units
Cost assigned to ending inventory using:
a) FIFO = 62 * 200 + 60 * 40 = $14800
b) LIFO = 100 * 50 + 140 * 55 = $12700
c) Weighted average = (100 * 50 + 400 * 55 + 120 * 60 + 200 * 62) / 820 = 46600 / 820 = 56.83 * 240 = $13639