Cast Iron Grills, Inc., manufactures premium gas barbecue grills. The company uses a periodic inventory system and
Question:
Units ___________Unit Cost
5,000 ................... $700
4,000 ................... 800
6,000 ................... 900
The replacement cost of the grills throughout 2019 was $1,000. Cast Iron sold 27,000 grills during 2019. The company's selling price is set at 200% of the current replacement cost.
Required:
1. Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2019 assuming that Cast Iron purchased 28,000 units during the year.
2. Repeat requirement 1 assuming that Cast Iron purchased only 15,000 units.
3. Why does the number of units purchased affect your answers to the above requirements?
4. Repeat requirements 1 and 2 assuming that Cast Iron uses the FIFO inventory cost method rather than the LIFO method.
5. Why does the number of units purchased have no effect on your answers to requirements 1 and 2 when the FIFO method is used?
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Related Book For
Intermediate Accounting
ISBN: 9781259722660
9th Edition
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas
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