At the beginning of its operations in March 2016, Mastiff Supplies Ltd. began with 7,500 units of inventory that it purchased at a cost of $7.00 each. The company’s purchases during March were as follows:

March 13...........5,000 units @ $8.00

Sales during March:

March 2............. 5,000 units

March 20 ........... 2,800 units

Mastiff Supplies uses a perpetual inventory system.

Required:

a. Calculate the cost of goods sold for March using the weighted-average cost formula.

b. Calculate the cost of goods sold for March using the first-in, first-out cost formula.

c. Which of the two inventory cost formulas results in the greater gross margin for March?

d. Which of the two inventory cost formulas results in the larger inventory balance at the end of March?

e. Compare your answers in parts “c” and “d” above and comment on the relationship between these items.