Question

Cookie Creations 06 a-b Natalie is busy establishing both divisions of her business (cookie classes and mixer sales) and completing her business degree. Her goals for the next 11 months are to sell one mixer per month and to give two to three classes per week. The cost of the fine European mixers is expected to increase. Natalie has just negotiated new terms with Kzinski that include shipping costs in the negotiated purchase price (mixers will be shipped FOB destination). Assume that Natalie has decided to use a periodic inventory system and now must choose a cost flow assumption for her mixer inventory. Inventory as on January 31, 2020 represents three deluxe mixer purchased at a unit cost of $595 The following transactions occur in February to May 2020. Natalie buys two deluxe mixers on account from Kzinski Supply Co. for $1,200 ($600 each), FOB destination, terms n/30. Feb. 2 She sells one deluxe mixer for $1,150 cash. 16 She pays the amount owed to Kzinski. 25 She buys one deluxe mixer on account from Kzinski Supply Co. for $618, FOB destination, terms n/30 Natalie sells two deluxe mixers for a total of $2,300 cash. She pays the amount owed to Kzinski. She buys two deluxe mixers on account from Kzinski Supply Co. for $1,224 ($612 each), FOB destination, terms n/30. She sells three deluxe mixers for a total of $3,450 cash Mar. 2 30 31 Apr. 1 13 Natalie pays the amounts owed to Kzinski. 30 She buys three deluxe mixers on account from Kzinski Supply Co. for $1,875 ($625 each), FOB destination, terms n/30. May 4 She sells one deluxe mixer for $1,150 cash 27 Determine the cost of goods available for sale. Cost of goods available for sale $ 6702 LINK TO TЕХT LINK TO ΤΕXT LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT Calculate (i) ending inventory, (ii) cost of goods sold, (ii) gross profit, and (iv) gross profit rate under each of the following methods: LIFO, FIFO, and average cost. (Round average cost per unit to 3 decimal places, e.g. 2.225. Round gross profit rate to 2 decimal places, e.g. 25.22%. Round all other answers to 0 decimal places, e.g. 2,525.) Average Cost LIFO FIFO Ending inventory $ 2487 2385 $ Cost of goods sold 4317 4215 Gross profit 3733 3835 $ Gross profit rate % % 46.37% 47.64 Open Show Work Click if you would like to Show Work for this question:

Answer 1

Cost of goods available for sale, LIFO and FIFO method are correct

Date		Units	Unit cost	Total cost
Feb 1	Beginning balance	3	$595	$1785
Feb 2	Purchases	2	$600	1200
Mar 2	Purchases	1	$618	618
Apr 1	Purchases	2	$612	1224
May 4	Purchases	3	$625	1875
	Total	11		$6702

In periodic method,

Average cost per unit= Total cost of goods available for sale/Total units

= $6702/11= $609.273

Sales units= Feb 16+Mar 30+Apr 13+May 27

= 1+2+3+1= 7 units

Ending units= Total units-Sales units

=11-7= 4 units

Ending inventory= Ending units*Average cost per unit

= 4*$609.273

= $2437

Cost of goods sold= Sales units*Average cost per unit

= 7*$609.273

= $4265

Sales= $1150+2300+3450+1150= $8050

Gross profit= Sales-Cost of goods sold

= $8050-4265

= $3785

Gross profit rate= Gross profit*100/Sales

= $3785*100/8050

= 47.02%