Fly-Buy Frisbees sells a wide variety of frisbees and uses a perpetual inventory system. On June 1, Fly- Buy Frisbees had five Fast Flying Frisbees on hand at a unit cost of $105. During June and July, the company had the following purchases and sales for this frisbee (all for cash):

Instructions
(a) Determine the cost of goods sold and ending inventory under a perpetual inventory system using (1) FIFO and (2) average.
(b) Calculate gross profit using (1) FIFO and (2) average.
(c) What impact, if any, does the choice of cost formula have on cash flow?
Taking It Further
What factors should the owner of Fly-Buy Frisbees consider when choosing a cost formula?

Transcribed Image Text:

Purchases Sales Units Unit Cost Units Unit Price $210 235 255 une 4 18 30 $115 120 12 25 255