Question
AutoParts Ltd. uses a periodic inventory system. The following are the transactions for January. Date Activities Units Acquired at Cost Units Sold at Retail Jan.
AutoParts Ltd. uses a periodic inventory system. The following are the transactions for January.
Date | Activities | Units Acquired at Cost | Units Sold at Retail |
Jan. 1 | Beginning inventory | 200 units @ $50 per unit | |
Jan. 6 | Purchase | 700 units @ $55 per unit | |
Jan. 12 | Sales | 600 units @ $80 per unit | |
Jan. 20 | Purchase | 500 units @ $60 per unit | |
Jan. 28 | Sales | 400 units @ $90 per unit |
For specific identification, the January 12 sale consisted of 100 units from beginning inventory and 500 units from the January 6 purchase; the January 28 sale consisted of 300 units from the January 20 purchase and 100 units from the January 6 purchase.
Required:
- Calculate the COGS and ending inventory using FIFO and LIFO methods.
- Determine the gross profit using the weighted average cost method.
- Analyze the impact of inventory costing methods on AutoParts Ltd.'s cash flow.
- Discuss how the choice of inventory costing method can influence managerial decision-making.
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