Red Centre uses the FIFO inventory cost flow assumption. It includes the following amounts in the company's financial statements:

The company sells only one product, and purchases and sales are made evenly throughout the year. The replacement cost of the inventory at 1 January and 31 December is \(\$ 125000\) and \(\$ 187500\), respectively. The cost of the company's purchases was 25 per cent higher at the end of the year than at the beginning.
Required: The owner of Red Centre asks you to analyse the preceding information and tell her the following:
a How much would the cost of goods sold be if it was calculated on the basis of the moving average for the period?
b What is the amount of the holding gain (inventory profit) included in the income calculated on a FIFO basis?
c Did the number of units in inventory increase or decrease during the year?

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Inventory, January 1 Purchases Cost of goods sold Inventory, December 31 $100 000 300 000 250 000 150 000