Story Company’s inventory records for the month of November reveal the following:
Inventory, November 1 300 units @ $27.00
November 4, purchase 375 units @ $26.50
November 7, sale 450 units @ $63.00
November 13, purchase 330 units @ $26.00
November 18, purchase 225 units @ $25.40
November 22, sale 570 units @ $63.75
November 24, purchase 300 units @ $25.00
November 28, sale 165 units @ $64.50
Selling and administrative expenses for the month were $16,200. Depreciation expense was $6,000. Story’s tax rate is 35%.
Required
1. Calculate the cost of goods sold and ending inventory under each of the following three methods assuming a periodic inventory system:
(a) FIFO,
(b) LIFO, and
(c) Weighted average.
2. Calculate the gross profit and net income under each costing assumption.
3. Under which costing method will Story pay the least taxes? Explain your answer.