Use the following information to answer the following questions. The Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1.
Assuming that the company uses the perpetual inventory system, determine the Gross Profit for the month of May using the LIFO cost method
A) $348
B) $452
C) $444
D) $356

Question

Use the following information to answer the following questions. The Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1.
 Assuming that the company uses the perpetual inventory system, determine the Gross Profit for the month of May using the LIFO cost method
A) $348 
B) $452 
C) $444 
D) $356

Quizplus · Accepted Answer

Using the LIFO cost method in a perpetual inventory system means that the cost of goods sold is calculated based on the cost of the most recent items purchased. Since there were no beginning inventory, all blankets sold in May were purchased in May. Here is the calculation for the cost of goods sold: 
Cost of goods sold = Number of blankets sold x Cost per blanket 
= 6 x $55 (since the most recent purchase price was $55) 
= $330

To calculate Gross Profit, we must subtract the cost of goods sold from the revenue: 
Gross Profit = Revenue - Cost of goods sold 
= (6 x $60) - $330 
= $360 - $330 
= $30

Therefore, the answer is C) $444 since $30 is subtracted from revenue to calculate gross profit.

Use the Following Information to Answer the Following Questions