The Cost Accountant of an organization, Jimmy, has been tasked with suggesting the inventory valuation method such that the gross margin percentage of an organization is higher than it currently is. He has the following estimated information on hand:
The selling price of a unit is estimated at $7.50. What would the gross margin percentage Jimmy will arrive at be, using both FIFO and Weighted-Average respectively? (Round cost per unit to nearest cent.)

Question

The Cost Accountant of an organization, Jimmy, has been tasked with suggesting the inventory valuation method such that the gross margin percentage of an organization is higher than it currently is. He has the following estimated information on hand:
 The selling price of a unit is estimated at $7.50. What would the gross margin percentage Jimmy will arrive at be, using both FIFO and Weighted-Average respectively? (Round cost per unit to nearest cent.)

Quizplus · Accepted Answer

Under FIFO the method, the Cost per Unit = Total Costs of Units Completed and Removed from WIP Inventory/(Units in Beginning WIP Inventory Completed + Units Started and Completed) = $28,209/(1,500 units + 4,000 units) = $5.13
Under Weighted-Average method, Cost per Unit = Total Costs of Units Completed and Removed from WIP Inventory/Units Completed this Period = $28,050/5,500 units = $5.10
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The Cost Accountant of an Organization, Jimmy, Has Been Tasked