Topanga Group began operations early in 2021. Inventory purchase information for the quarter ended March 31, 2021, for Topanga's 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 Jan. 7 Feb. 16 March 22 Totals Units 7.000 23,000 27,000 57,000 Unit Cost $6.00 7.00 8.00 Total Cost $ 42,000 161,000 216,000 $419,000 Sales for the quarter, all at $10 per unit, totaled 32,000 units leaving 25,000 units on hand at the end of the quarter Required: 1. Calculate Topanga's cost of goods sold for the first quarter using: a FIFO b. LIFO C. 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 Reg 1B Req 1C Reg 2 Req3 Ending Inventory - Periodic FIFO # of units Cost per Ending unit Inventory Inventory $ 0.00 Calculate Topanga's cost of goods sold for the first quarter using FIFO. Cost of Goods Available for Sale Cost of Goods Sold - Periodic FIFO FIFO: Cost per Cost of Goods # of units Cost per w of units Cost of unit Available for sold unit Sale Beginning Inventory 0 $ 0.00 Purchases: January 7 7,000 $ 6.00 42.000 $ 6.00 February 16 23,000 $ 7.00 161,000 $ 7.00 March 22 27,000 $ 8.00 216,000 $ 8.00 Total 57.000 $ 419,000 Goods Sold In ending $ 6.00 $ 7.00 8.00 $ Req 1A Reg 1B Req 1C Reg 2 Reg 3 ces Cost per Calculate Topanga's cost of goods sold for the first quarter using LIFO. Cost of Goods Available for Sale Cost of Goods Sold - Periodic LIFO LIFO Cost of Goods # of units #of units Cost per Cost of unit Available for sold unit Goods Sold Sale Beginning Inventory $ 0 $ 0.00 Purchases: January 7 7,000 $ 6.00 42.000 $ 6.00 February 16 23,000 $ 7.00 161,000 $ 7.00 March 22 27,000 $ 8.00 216,000 $ 8.00 Total 57,000 S 419,000 Ending Inventory - Periodic LIFO # of units Cost per Ending in ending unit Inventory inventory $ 0.00 $ 6.00 $ $ 7.00 8.00 Reg 1A Reg 1B Req1c Reg 2 Reg 3 Calculate Topanga's cost of goods sold for the first quarter using average cost. (Round average cost per unit to 4 decimal places.) Cost of Goods Available for Sale Cost of Goods Sold - Average Cost Ending Inventory - Average Cost Average Cost Unit Cost of Goods # of units Average Cost of #of units Average W of units Available for Cost per Ending Cost per Cost sold in ending Goods Sold Sale Unit Inventory unit Inventory Beginning Inventory Purchases January 7 7,000 $ 6.00 $ 42,000 February 16 23,000 $ 7.00 161,000 March 22 27,000 $ 8.00 216,000 Total 57,000 $ 419.000 Req 1A Reg 1B Req 1C Reg 2 Req3 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 Reg 1A Reg 1B Req 10 Req 2 Req 3 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
