The following information relates to the inventory of Luscious Lashes for the month of January

Luscious Lashes use the periodic inventory system. During the month, 700 units of false lashes were sold for \($6300\). A physical stocktake on 31 January verified that 590 units were on hand. Ignore GST.
Required

(a) Prepare a Statement of Profit or Loss up to gross profit for the month of January using each of the following costing methods:
i. specific identification, assuming that 300 units were sold from the beginning inventory and 400 units were sold from the first purchase ii. FIFO iii. LIFO iv. weighted average.

(a) Which cost flow method resulted in the highest gross profit on sales? the highest ending inventory? Explain why your results differ.

(b) Prepare a Statement of Profit or Loss to gross profit for the month of January using the FIFO and LIFO costing methods and assuming the 23 December purchase had not been made.

(c) Management of Luscious Lashes is expecting the unit cost to increase to \($6.00\) early in the next period. In anticipation of the price increase, a purchase of 600 additional units was made on 29 January at a unit cost of \($5.80\). Prepare a Statement of Profit or Loss to gross profit for the month of January using the FIFO and LIFO costing methods.

(d) Compare your results obtained in requirements A, C and D. Explain why your results are or are not the same.

Transcribed Image Text:

Units Unit cost Total cost Jan. 1 Beginning inventory 500 $5.00 $2 500 10 Purchases 500 5.30 2 650 23 Purchases 600 5.60 3 360 1600 $ 8510