Reference no: EM132323134

Problem 6-8A

Fast Framing Co. began March with 73 units of inventory that cost $50 each. During the month, Fast made the following purchases:

Mar 4   113   units at $48
  12      81    units at $49
  19      167  units at $52
  25      34    units at $56

The company uses a periodic inventory system, and the physical count at March 31 shows 51 units of inventory on hand.

Required

1. Determine the ending inventory and cost of goods sold amounts for the March financial statements under (a) weighted-average cost and (b) FIFO cost. Round average cost per unit to the nearest cent and all other amounts to the nearest dollar.

2. Sales revenue for March totalled $40,000. Compute Fast's gross margin for March under each method.

3. Which method will result in lower income taxes for Fast? Why?

4. Which method will result in higher net income for Fast? Why?

Problem 6-9A

Winslow Products, which uses a periodic inventory system, began 2017 with 6,000 units of inventory that cost a total of $90,000. During 2017, Winslow Products purchased merchan-dise on account as follows:

Purchase 1(10,000 units at $14 per unit)    5140,000

Purchase 2 (20,000 units at $12 per unit)    240,000

At year end, the physical count indicated 20,000 units of inventory on hand. Required

1. How many units did Winslow Products sell during the year? The sale price per unit was $38. Determine Winslow's sales revenue for the year.

2. Compute cost of goods sold by the weighted-average method. Round average cost per unit to the nearest cent and all other amounts to the nearest dollar. Then determine gross margin for the year.

3. Compute cost of goods sold by the FIFO method. Then determine gross margin for the year.

4. Compare the gross margins you calculated for each inventory method in Requirements 2 and 3. What conclusions can you draw when the purchase prices for inventory are falling?

Problem 6-10A

Titan Performance Tire began May with 50 units of inventory that cost $264 each. During May Titan Performance Tire completed these inventory transactions:

1. The above data are taken from Titan Performance Tire's perpetual inventory records. Which cost method does Titan Performance Tire use?

2. Compute Titan Performance Tire's cost of goods sold for May under the

a. Perpetual inventory system

b. Periodic inventory system

3. Compute gross margin for May.