Question

Warnerwoods Company uses a perpetual inventory system. It entered into the following purchases and sales transactions for March. (For specific identification, the March 9 sale consisted of 80 units from beginning inventory and 340 units from the March 5 purchase; the March 29 sale consisted of 40 units from the March 18 purchase and 120 units from the March 25 purchase.) Date Activities Units Acquired at Cost.

Date	Activities	Units acquired at cost	Units sold at retail
March 1	Beginning inventory	100 units @ \(50.00 per unit
March 5	Purchase	400 units @ \)55.00 per unit
March 9	Sales		420 units @ \(85.00 per unit
March 18	Purchase	120 units @ \)60.00 per unit
March 25	Purchase	200 units @ \(62.00 per unit
March 29	Sales		160 units @ \)95.00 per unit
	Total	820 units	580 units

Required

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

Short answer

FIFO	$19,100
LIFO	$17,980
Weighted Average	$18,652
Specific Identification	$18,360

Step-by-step solution

Definition of Gross Profit

Gross profit is defined as the benefit generated by the business entity from the sale over its direct cost incurred in the production process.

Calculation of Total sales

Particular	Amount $
Sales on March 9 - 420 units @ $85	$35,700
Sales on March 29 – 160 units @ $95	15,200
Total Sales	$50,900

Calculation of Cost of Goods Sold

Particular	FIFO	LIFO	Weighted Average	Specific Identification
Cost of goods available for sale	$46,600	$46,600	$46,600	$46,600
Less: Ending inventory	(14,800)	(13,680)	(14,352)	(14,060)
Cost of goods sold	$31,800	$32,920	$32,248	$32,540

Calculation of Gross Profit

Particular	FIFO	LIFO	Weighted Average	Specific Identification
Sales	$50,900	$50,900	$50,900	$50,900
Less: Cost of goods sold	(31,800)	(32,920)	(32,248)	(32,540)
Gross profit	$19,100	$17,980	$18,652	$18,360