Inventory information for Great Falls Merchandising,Inc.is provided below.Sales for the period were 2,800 units at $8 each.The company uses a FIFO periodic inventory system. Determine the gross profit for the quarter ended March 31.

Question

Inventory information for Great Falls Merchandising,Inc.is provided below.Sales for the period were 2,800 units at $8 each.The company uses a FIFO periodic inventory system.  Determine the gross profit for the quarter ended March 31.

Quizplus · Accepted Answer

First, we need to calculate the cost of goods sold using the FIFO method:

Beginning Inventory:
300 units @ $5 = $1,500

Purchases:
1,200 units @ $6 = $7,200
500 units @ $7 = $3,500

Goods Available for Sale:
2,000 units
       
Cost of Goods Sold:
1,800 units @ $5 (from beginning inventory) = $9,000
1,000 units @ $6 (from first purchase) = $6,000
        Total Cost of Goods Sold = $15,000

Next, we can calculate gross profit:

Sales Revenue = 2,800 units x $8 = $22,400
Cost of Goods Sold = $15,000
        Gross Profit = $7,400

Therefore, the correct answer is (C) $12,400.

Inventory Information for Great Falls Merchandising,Inc