Given the following data, what is the value of the gross profit as determined by the LIFO method?

Question

Quizplus · Accepted Answer

To determine the gross profit by LIFO method, we would need to calculate cost of goods sold (COGS) and subtract it from sales. From the given data, we can calculate COGS as follows:

Beginning inventory: 300 units @ $10 = $3,000
Purchases:
- 600 units @ $11 = $6,600
- 400 units @ $12 = $4,800
Goods available for sale = 1,300 units
Units sold = 1,000 units

To determine COGS, we need to use the LIFO method which assumes that the most recent purchases are sold first. Therefore, COGS would be calculated by pricing the 600 units purchased at $11 each, followed by 400 units purchased at $12 each, and then the remaining 0 units from beginning inventory at $10 each:

COGS = (600 x $11) + (400 x $12) + (0 x $10) = $6,600 + $4,800 + $0 = $11,400

Now, we can calculate the gross profit by subtracting COGS from sales:

Gross Profit = Sales - COGS = (1,000 units x $24) - $11,400 = $12,000 - $11,400 = $6000.

Therefore, the value of the gross profit as determined by the LIFO method is $1,560.

Given the Following Data, What Is the Value of the Gross