Purchase Solution

# Inventory calculations

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You have the following information for Benton Inc. for the month ended October 31, 2007. Benton uses a periodic method for inventory.

Date Description Units Unit Cost or Selling Price

Oct 1 Beginning Inventory 60 \$25
Oct 9 Purchase 120 27
Oct 11 Sale 100 35
Oct 17 Purchase 90 28
Oct 22 Sale 60 40
Oct 25 Purchase 80 29
Oct 29 Sale 120 40

Instructions

(a) Calculate (i) ending inventory, (ii) costs of goods sold, (iii)gross profit, and (iv) gross profit rate under each of the following methods.
(1) LIFO
(2) FIFO
(3) Average cost. (Round cost per unit to three decimal places.)

(b) Compare results for the three cost flow assumpitions.

##### Solution Summary

The solution explains how to calculate ending inventory, CGS, gross profit using LIFO, FIFO, Average cost methods

##### Solution Preview

(a) Total cost of goods available for sale are 60 X 25 + 120 X 27 + 90 X 28 + 80 X 29 = \$9,580
Total units available for sale = 60+120+90+80 = 350
Units sold = 100+60+120 = 280
Units in ending inventory = 350-280 = 70
Total sales = 100 X 35 + 60X40 + 120 X 40 = \$10,700
(1) LIFO - In LIFO the latest units are assumed to be sold first. The ending inventory will consist of the earliest units. The ending ...

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