P6-3 A Save Mart Centre Inc. Began operations on May 1 and uses a perpetual inventory system. During May the company had the following purchases and sales for one of its products: \

Purchases sales

Date Units Unit Cost Units Unit Price

May 1 120 $96

3 80 $258

8 100 106

13 80 283

15 60 110

20 60 307

27 40 334

Instructions:

(a) Determine the cost of goods sold and cost of ending inventory using (1) FIFO and (2) average cost. Ignore the effect of income tax. (For average cost, use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.) Which cost formula produces the higher gross profit and net income?

(b) Which cost formula produces the higher gross profit and net income?

(c) Which cost formula produces the higher ending inventory valuation?

(d) What guidelines should Save. Mart consider in choosing between the FIFO and average cost formulas?

(e) Which cost formula produces the higher cash flow