O'Meara Sales sells golf bags and uses a perpetual inventory system. O'Meara's inventory records show that at March 1, there were 30 units on hand at a cost of $135 each. Transactions related to purchase and sale of golf bags in March were as follows: Instructions
a. For each of the following cost formulas, calculate the ending inventory as at March 31 and the cost of goods sold for the month of March.
i. FIFO
ii. Average
b. Calculate the gross profit and gross profit margin that will be reported under each of the two cost formulas.
c. Assume that O'Meara is motivated to report the highest profit possible. Which method will they prefer? Would your answer be different if the cost of golf bags was increasing, instead of decreasing? What if the cost was fluctuating randomly? Assume the selling price of the golf bags is the same regardless of which cost formula is used.

Question

O'Meara Sales sells golf bags and uses a perpetual inventory system. O'Meara's inventory records show that at March 1, there were 30 units on hand at a cost of $135 each. Transactions related to purchase and sale of golf bags in March were as follows:  Instructions 
a. For each of the following cost formulas, calculate the ending inventory as at March 31 and the cost of goods sold for the month of March.
i. FIFO
ii. Average
b. Calculate the gross profit and gross profit margin that will be reported under each of the two cost formulas.
c. Assume that O'Meara is motivated to report the highest profit possible. Which method will they prefer? Would your answer be different if the cost of golf bags was increasing, instead of decreasing? What if the cost was fluctuating randomly? Assume the selling price of the golf bags is the same regardless of which cost formula is used.

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The Answer of O'Meara Sales sells golf bags and uses a perpetual inventory system. O'Meara's inventory records show that at March 1, there were 30 units on hand at a cost of $135 each. Transactions related to purchase and sale of golf bags in March were as follows:  Instructions 
a. For each of the following cost formulas, calculate the ending inventory as at March 31 and the cost of goods sold for the month of March.
i. FIFO
ii. Average
b. Calculate the gross profit and gross profit margin that will be reported under each of the two cost formulas.
c. Assume that O'Meara is motivated to report the highest profit possible. Which method will they prefer? Would your answer be different if the cost of golf bags was increasing, instead of decreasing? What if the cost was fluctuating randomly? Assume the selling price of the golf bags is the same regardless of which cost formula is used.

O'Meara Sales Sells Golf Bags and Uses a Perpetual Inventory