Question: ABC uses a FIFO perpetual inventory system and has the following inventory transactions during 2007. Purchases of $3,000,000. The physical inventory count at the beginning and ending of 2007 consisted of the following:
Beginning Ending
Raw materials $500,000 $400,000
Work-in-process $95,000 $85,000
Finished Goods $405,000 $615,000
ABC had shipped goods to customers on December 30, 2007 using f.o.b Shipping Point for a total sale of $400,000. The cost of the goods was $120,000. Additionally, ABC received a shipment of raw materials from its supplier on January 2, 2008 with a total invoice cost of $95,000. The invoice arrived December 31 and indicated that the terms were f.o.b. seller's dock. Calculate the following:
1. Ending inventory as of December 31, 2007
2. Total cost of goods sold for 2007.
3. ABC's gross margin on sales for 2007.