Inventory Costing Methods}

Terpsichore Company uses a perpetual inventory system. For 2017 and 2018, Terpsichore has the following data:

Required:
1. For each year, compute cost of goods sold, the cost of ending inventory, and gross margin using FIFO.
2. For each year, compute cost of goods sold, the cost of ending inventory, and gross margin using the weighted average cost method. (Note: Use four decimal places for per-unit calculations and round all other numbers to the nearest dollar.)
3. CONCEPTUAL CONNECTION Which method would result in the lowest amount paid for taxes?
4. CONCEPTUAL CONNECTION Which method produces the most realistic amount for income? For inventory? Explain your answer.

5. CONCEPTUAL CONNECTION Compute Terpsichore's gross profit ratio and inventory turnover ratio under both inventory costing methods. (Note: Round answers to two decimal places.) How would the choice of inventory costing method affect these ratios?
\section*{Problem

Transcribed Image Text:

Purchase Price Sale Price Activity Units (per unit) (per unit) 2017 Beginning inventory 100 $45 Purchase 1, Feb. 25 700 52 Sale 1, Apr. 15 600 $90 Purchase 2, Aug. 30 500 56 56 Sale 2, Nov. 13 600 90 Purchase 3, Dec. 20 400 58 2018 Sale 3, Mar. 8 400 90 Purchase 4, June 28 900 62 63 90 Sale 4, Dec. 18 800 90