Question

Refer to the information in Problem 5-3A and assume the periodic inventory system is used.

Required

4. Compute gross profit earned by the company for each of the four costing methods in part 3.

Short answer

Method	Gross profit
FIFO	$46,200
LIFO	$45,800
Weighted Average	$44,956
Specific Identification	$46,000

Step-by-step solution

Definition of Cost Accounting

The accounting branch dealing with the calculation of expenses incurred in the business process is known as cost accounting. Such accounting assists in controlling the business organization.

Gross Profit Earned

Cost of goods available for sale:

Particular	Units	X	Per unit cost	=	Total cost
Jan 1	600	X	$45	=	$27,000
Feb 10	400	X	$42	=	$16,800
March 13	200	X	$27	=	$5,400
Aug 21	100	X	$50	=	$5,000
Sep 5	500	X	$46	=	$23,000
Total	1,800				$77,200

Cost of goods sold:

Particular	FIFO	LIFO	Weighted Average	Specific Identification
Cost of goods available for sale	$77,200	$77,200	$77,200	$77,200
Less: Ending Inventory	(18,400)	(18,000)	(17,156)	(18,200)
Cost of goods sold	$58,800	$59,200	$60,044	$59,000

Gross Profit:

Particular	FIFO	LIFO	Weighted Average	Specific Identification
Sales$\left(1,400\times \$75\right)$	$105,000	$105,000	$105,000	$105,000
Less: Cost of goods sold	(58,800)	(59,200)	(60,044)	(59,000)
Gross Profit	$46,200	$45,800	$44,956	$46,000