Navy surplus began October 2020 with 70 shirts that cost $25 each. During the month, Navy Surplus made the following purchases at cost:

October 4 97 shirts @ $26 = $2,522

19 164 shirts @ 28 = 4,592

25 38 shirts @ 29 = 1,102

Navy Surplus sold 320 (150 shirts on October 22 and 170 shirts on October 30), and at October 31 the ending inventory consists of 49 shirts. The sale price of each shirt was $55.

Required: 1. Determine the cost of goods sold and ending inventory amounts for under (a) weighted-average cost and (b) FIFO cost. Round weighted-average cost per unit to four decimal places, and round all other amounts to the nearest dollar. (Assume a perpetual inventory system is used.)

2. Explain why cost of goods sold is highest under weighted-average cost. Be specific. 3. Prepare 's income statement for October 2020 . Report gross profit. Operating expenses totalled $3,750. Navy surplus uses the weighted-average costing for inventory. The income tax rate is 32%. (Round income tax expense to the nearest whole dollar.)

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