Answer:
total revenue = 380 units x $88 = $33,440
Beginning inventory 120 units @ $40 = $4,800
Units purchased 330 units @ $44 = $14,520
total 450 units $19,320
Ending inventory consisted of 70 units.
COGS using LIFO = $19,320 - (70 units x $40) = $16,520
COGS using FIFO = $19,320 - (70 units x $44) = $16,240
COGS using weighted average = $19,320 - [70 units x ($19,320/450)] = $16,315
A. Compute the gross margin for Mason Company using the following cost flow assumptions:
1) FIFO ⇒ $33,440 - $16,240 = $17,200
2) LIFO ⇒ $33,440 - $16,520 = $16,920
3) Weighted average ⇒ $33,440 - $16,315 = $17,125
B. What is the amount of net income using FIFO,LIFO, and weighted average?
1) FIFO ⇒ $33,440 - $16,240 = $17,200 - $3,100 = $14,100
2) LIFO ⇒ $33,440 - $16,520 = $16,920 - $3,100 = $13,820
3) Weighted average ⇒ $33,440 - $16,315 = $17,125 - $3,100 = 14,025
C. Compute the amount of ending inventory using (1) FIFO, (2) LIFO, and (3) weighted average.
1) FIFO ⇒ 70 units x $44 = $3,080
2) LIFO ⇒ 70 units x $40 = $2,800
3) Weighted average ⇒ 70 units x ($19,320/450) = $3,005
Mason Company's inventory at the end by using FIFO is $3,080, LIFO is $2,800 and weighted average is $3005. Net income as calculated by following FIFO is $14,100, LIFO is $13,820 and weighted average is $ 14,027.
Net Income refers to the amount of money that each person or business undertakes after deducting expenses, grants, and taxes. In a transaction, the income of the entire business is in arrears at all costs, including salaries and wages, the cost of goods or raw materials, and taxes.
Cost of goods sold by FIFO, LIFO, and Weighted average:
Under FIFO, the Cost of goods sold is $ 16,240
Under LIFO, Cost of goods sold is$ 16,520
Under weighted average, the Cost of goods sold is $ 16,313
A) Gross margin for Mason Company:
Under FIFO, the Gross margin is $ 17,200
Under LIFO, Gross Margin is $ 16,920
Under weighted average, Gross Margin is $ 17,127
B) Net income of mason company by following FIFO is $14,100, LIFO is $ 13,820 and weighted average is $ 14,027.
C) Mason Company's inventory at the end by using FIFO is $ 3,080, LIFO is $ 2,800 and weighted average is $ 3,005.
The calculation has been attached in the image below.
Thus, gross margin, net income, and inventory at the end are calculated by following FIFO, LIFO, and weighted average methods.
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