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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).


Learn more about this topic:

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How to Calculate Gross Profit Margin: Definition & Formula

from Financial Accounting: Help and Review

Chapter 5 / Lesson 17
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