Chan Company had a beginning inventory on January 1, 2014, of 150 units of product YBB at a cost of $30 per unit. During the year, purchases were as follows:
______________________Units Unit Cost
Feb. 17.........................700............$35
Apr. 12.........................400.............39
July 10..........................300.............45
Oct. 26..........................250............47
Chan uses a periodic inventory system. At the end of the year, there were 200 units on hand.
Instructions
(a) Determine the cost of goods available for sale.
(b) During the year, Chan Company sold product YBB for $72 per unit. Calculate the number of units sold during the year and total sales revenue.
(c) Determine the ending inventory and the cost of goods sold using (1) FIFO and (2) average.
(d) Calculate gross profit using FIFO and average.
Taking It Further
The owner of Chan Company would like to minimize her income taxes. Last year, prices were falling and Chan Company used FIFO. Th is year she would like to switch to average. Do you recommend this change or not? Explain.