Question - Cast Iron Grills. Inc., manufactures premium gas barbecue grills. The company uses a periodic inventory system and the LIFO cost method for its grill inventory. Cast Iron's December 31, 2018, fiscal year-end inventory consisted of the following (listed in chronological order of acquisition):
|
Units
|
Unit Cost
|
|
7,600
|
$1,000
|
|
5,300
|
1,100
|
|
8,600
|
1,200
|
The replacement cost of the grills throughout 2017 was $1.300. Cast Iron sold 40,000 grills during 2017. The company's selling price is set at 200% of the current replacement cost.
Required:
1. Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2017 assuming that Cast Iron purchased 41,000 units during the year.
2. Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2017 assuming that Cast Iron purchased only 21,500 units during the year.
3. Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2017 assuming that Cast Iron purchased 41.000 units (as per requirement 1) and 21,500 units (as per requirement 2) during the year and uses the FIFO inventory cost method rather than the LIFO method.