Star Company accounts for its inventory using the LIFO method under periodic inventory procedure. Data on purchases, sales, and inventory for the year ended 2009 December 31, are:
|
Units |
Unit Cost |
|
|
Merchandise inventory, |
||
|
1-Jan |
2,000 |
@ $20 |
|
Purchases: |
||
|
January / |
5,000 |
@ 24 |
|
7-Jul |
10,000 |
@ 28 |
|
21-Dec |
6,000 |
@ 32 |
During 2009, 16,000 units were sold for USD 1,280,000, leaving an inventory on 2009 December 31, of 7,000 units.
a. Compute the gross margin earned on sales during 2009.
b. Compute the change in gross margin that would have resulted if the purchase of December 21 had been delayed until 2010 January 6.
c. Recompute the gross margin assuming that 9,000 units rather than 6,000 units were purchased on December 21 at the same cost per unit.
d. Solve parts (a), (b), and (c) using the FIFO method.