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Compute gross profit earned by the company for each of the four costing methods. For specific identification, units sold include 80 units from beginning inventory, 340 units from the March 5 purchase, 40 units from the March 18 purchase, and 120 units from the March 25 purchase



Answer :

Here, the FIFO method's gross profit will be 19100, the LIFO method's gross profit will be 17980, the Avg cost method's gross profit will be 18652, and the Specific ID method's gross profit will be 18360.

First in, first out (FIFO) is an uncomplicated approach to inventory valuation based on the presumption that commodities acquired or created first are sold first. According to theory, the older stock is sent to clients before the newer stock.

The LIFO approach is predicated on the idea that the most recent items added to a company's inventory have already been sold. The computation was done using the purchase prices of these current goods.

A company's gross profit is calculated by deducting its entire sales from its total cost of products sold. All products sold by the business are included in the overall sales. All of the variable costs related to sales are added together to form the overall cost of the products sold.

Particulars                      FIFO         LIFO  Avg cost      Spec. ID

Sales                              50900 50900   50900        50900

Cost of goods sold      31800         32920   32248        32540

Gross Profit                     19100         17980   18652        18360

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