Cement Company, Inc. began the first quarter with 1,000 units of inventory costing $25 per unit. During the first quarter, 3,000 units were purchased at a cost of $40 per unit, and sales of 3,400 units at $65 per units were made. During the second quarter, the company expects to replace the units of beginning inventory sold at a cost of $45 per unit. Cement Company uses the LIFO method to account for inventory.The amount of gross profit for the first quarter is:
A) $83,000
B) $87,000
C) $90,000
D) $221,000
E) $250,000

Question

Quizplus · Accepted Answer

Under LIFO, the last units purchased are the first to be sold. Therefore, the cost of goods sold (COGS) for the 3,400 units sold is calculated as follows: 3,000 units at $40 each and 400 units at $25 each. The total revenue from sales is 3,400 units at $65 each. Gross profit is calculated as total revenue minus COGS.