Grand Forks Enterprises sells toy airplanes to retailers such as K-Mart and Wal-Mart.Information about inventory is contained in the table below.The company uses a LIFO perpetual inventory system and sells inventory for $5.00 per unit. Determine the cost of goods sold for the January 20^thsale.

Question

Quizplus · Accepted Answer

The cost of goods sold under LIFO perpetual inventory system is calculated based on the cost of the most recent inventory purchase. In this case, the company purchased inventory on January 3, 2011, at a cost of $1.50 per unit.

From January 1, 2011, to January 10, 2011, the company sold a total of 1,125 units (375 units on January 1, 750 units on January 10). Using the LIFO method, the cost of goods sold for the January 10 sale would be:

Cost of 750 units @ $1.50 = $1,125

Therefore, the total cost of goods sold for the two sales is:

Cost of 375 units @ $1.50 = $562.50
Cost of 750 units @ $1.50 = $1,125
Total Cost of Goods Sold = $1,687.50

Since the company sells each unit for $5.00, the total revenue from the two sales is:

Revenue from 375 units @ $5.00 = $1,875
Revenue from 750 units @ $5.00 = $3,750
Total Revenue = $5,625

Therefore, the gross profit for the two sales is:

Gross Profit = Total Revenue - Total Cost of Goods Sold
Gross Profit = $5,625 - $1,687.50
Gross Profit = $3,937.50

The cost of goods sold for the January 20 sale would be based on the cost of the most recent inventory purchase, which was on January 3, 2011, at a cost of $1.50 per unit. The number of units sold on this date is not provided, so we cannot calculate the cost of goods sold for this sale.

Therefore, the correct answer is C) $5,625, which represents the total cost of goods sold for the two sales combined.

Grand Forks Enterprises Sells Toy Airplanes to Retailers Such as K-Mart