The Baby Store had a beginning inventory on January 1 of 200 full-size strollers at a cost of $110 per unit. During the year, the following purchases were made:

___________ Units _______ Unit Cost

Mar. 15 ……… 80 ………….. $111

July 20 ...…….. 60 …………... 110

Sept. 4 ………. 25 …………... 108

Dec. 2 ………. 10 …………… 103

At the end of the year, there were 35 units on hand. The Baby Store uses a periodic inventory system.

Instructions

(a) Determine the cost of goods available for sale.

(b) During the year, The Baby Store sold the strollers for $290 per unit. Calculate the number of units sold during the year and total sales revenue.

(c) Determine the cost of the ending inventory and the cost of goods sold using FIFO and Weighted average. 

(d) Calculate gross profit using FIFO and Weighted average.

Taking It Further

The owner of The Baby Store would like to minimize profit. Last year, prices were rising and The Baby Store used the weighted average cost formula. This year, the owner would like to use FIFO. Should the company change to FIFO? Explain.