Nathan's Grills, Inc. imports and sells premium-quality gas grills. The company had the following layers in its LIFO inventory at January 1, 2008 at which time the replacement cost of the inventory was $675 per unit.

The replacement cost of grills remained constant throughout 2008. Nathan's sold 275 units during 2008. The company established the selling price of each unit by doubling its replacement cost at the time of sale.
Required:
1. Determine gross margin and the gross margin percentage for 2008 assuming that Nathan’s Grills purchased 280 units during the year.
2. Determine gross margin and the gross margin percentage for 2008 assuming that Nathan’s Grills purchased 180 units during the year.
3. Explain why the assumed number of units purchased makes a difference in your answers.

Transcribed Image Text:

Year LIFO Layer Added Units Unit Cost 2005 50 $450 2006 40 500 2007 60 600