# The following data was extracted from the records of Winsam Company: Sales Revenue 450 units at...

## Question:

The following data was extracted from the records of Winsam Company:

Sales Revenue 450 units at $35 per unit Beginning Inventory 100 units at$16 per unit

Purchases 400 units at $20 per unit What is the gross profit using the FIFO method? ## Gross Profit: The profit is computed by deducting the cost of goods sold from the sales value. A higher gross profit margin is preferred by a company. A higher gross profit margin denotes the difference between sales value and the cost of goods sold. ## Answer and Explanation: The gross profit using the FIFO method is$7,150.

Explanation: The gross profit using the FIFO method is $7,150 ($15,750 - $8,600), which has been computed by deducting the cost of goods sold from the sales revenue. Working Note 1: The cost of the total purchases is$8,000 ($20 x 400). Working Note 2: The cost of goods avaliable for sale is$9,600 ($8,000 +$16 x 100).

Working Note 3: The total sales value is $15,750 ($35 x 450).

Working Note 4: The cost of ending inventory is $1,000 ($20 x 50).