Suppose a Costco store in Denver, Colorado, ended September 2014 with 100,000 units of merchandise that cost an average of $7.20 each. Suppose the store then sold 95,000 units for $1,235,000 during October. Further, assume the store made two large purchases during October as follows:
Oct 8 20,000 units @ $6.10 = $122,000
22 60,000 units @ $5.20 = $312,000
Requirements
1. At October 31, the store manager needs to know the store’s gross profit under both FIFO and LIFO. Supply this information.
2. What caused the FIFO and LIFO gross profit figures to differ?