Welding Products Company purchased 1,000 cases of welding rods at a cost of $95 per case on April 17. On August 19, the company purchased another 1,000 cases at a cost of $112 per case. (Assume that there was no beginning inventory.) Sales data for the welding rods are as follows:

Date Cases Sold

May 2 ..........200

June 29 .........600

July 2 ........... 50

Sept. 4 ..........500

Oct. 31 ..........420

Welding Products uses a perpetual inventory system and the sales price of the welding rods was $130 per case.

Required:

1. Compute the cost of ending inventory and cost of goods sold using the FIFO method.

2. Compute the cost of ending inventory and cost of goods sold using the LIFO method.

3. Compute the cost of ending inventory and cost of goods sold using the average cost method. (Use four decimal places for per unit calculations and round all other numbers to the nearest dollar.)

4. Assume that operating expenses are $22,500 and Welding Products has a 30% tax rate. How much will the cash paid for income taxes differ among the three inventory methods?

5. Compute Welding Product’s gross profit ratio and inventory turnover ratio under each of the three inventory costing methods. How would the choice of inventory costing method affect these ratios?