Save-Mart Center Inc. began operations on May 1 and uses a perpetual inventory system. During May, the company had the following purchases and sales for one of its products:

	Purchases		Sales
Date	Units	Unit Cost	Units	Unit Price
May1	120	$100
3			80	$250
8	100	110
13			80	275
15	60	115
20			60	300
27			40	325

Instructions

(a)

Determine the cost of goods sold and cost of ending inventory using (1) FIFO and (2) average cost. Ignore the effect of income tax. (For average cost, use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.)

(b)

What guidelines should Save-Mart consider in choosing between the FIFO and average cost formulas?

(c)

Which cost formula produces the higher gross profit and net income?

(d)

Which cost formula produces the higher ending inventory valuation?

(e)

Which cost formula produces the higher cash flow?