Topanga Group began operations early in 2021. Inventory purchase information for the quarter ended March 31, 2021, for Topangas only product is provided below. The unit costs include the cost of freight. The company uses a periodic inventory system to report inventory and cost of goods sold.

Date of Purchase	Units		Unit Cost			Total Cost
Jan. 7	6,000		$	5.00			$	30,000
Feb. 16	15,000			6.00				90,000
March 22	19,000			7.00				133,000
Totals	40,000						$	253,000

Sales for the quarter, all at $8 per unit, totaled 24,000 units leaving 16,000 units on hand at the end of the quarter. Required: 1. Calculate Topanga's cost of goods sold for the first quarter using:

1. FIFO
2. LIFO
3. Average cost

2. Calculate Topanga's gross profit ratio for the first quarter using FIFO, LIFO, and Average cost. 3. Comment on the relative effect of each of the three inventory methods on the gross profit ratio.

• Req 1A
• Req 1B
• Req 1C
• Req 2
• Req 3

Calculate Topanga's cost of goods sold for the first quarter using FIFO.

FIFO:	Cost of Goods Available for Sale			Cost of Goods Sold - Periodic FIFO			Ending Inventory - Periodic FIFO
	# of units	Cost per unit	Cost of Goods Available for Sale	# of units sold	Cost per unit	Cost of Goods Sold	# of units in ending inventory	Cost per unit	Ending Inventory
Beginning Inventory
Purchases:
January 7
February 16
March 22
Total

• Req 1B
• Req 1C
• Req 2
• Req 3

Calculate Topanga's cost of goods sold for the first quarter using LIFO.

LIFO	Cost of Goods Available for Sale			Cost of Goods Sold - Periodic LIFO			Ending Inventory - Periodic LIFO
	# of units	Cost per unit	Cost of Goods Available for Sale	# of units sold	Cost per unit	Cost of Goods Sold	# of units in ending inventory	Cost per unit	Ending Inventory
Beginning Inventory
Purchases:
January 7
February 16
March 22
Total

Calculate Topanga's cost of goods sold for the first quarter using average cost. (Round average cost per unit to 4 decimal places.)

Average Cost	Cost of Goods Available for Sale			Cost of Goods Sold - Average Cost			Ending Inventory - Average Cost
	# of units	Unit Cost	Cost of Goods Available for Sale	# of units sold	Average Cost per Unit	Cost of Goods Sold	# of units in ending inventory	Average Cost per unit	Ending Inventory
Beginning Inventory
Purchases:
January 7
February 16
March 22
Total

Calculate Topanga's gross profit ratio for the first quarter using FIFO, LIFO, and Average cost.

	Choose Numerator:		Choose Denominator:	=	Gross Profit Ratio
				=	Gross profit ratio
FIFO				=
LIFO				=
Average cost				=

Comment on the relative effect of each of the three inventory methods on the gross profit ratio.

In situations when costs are rising, LIFO results in a

cost of goods sold and therefore, a

gross profit ratio than FIFO.