You are the vice president of finance of Sandy Alomar Corporation, a retail company that prepared two different schedules of gross margin for the firs
You are the vice president of finance of Sandy Alomar Corporation, a retail company that prepared two different schedules of gross margin for the first quarter ended March 31, 2014.
\r\nThese schedules appear below.
\r\nSales Cost of Gross
\r\n($5 per unit) Goods Sold Margin
\r\nSchedule 1 $150,000 $124,900 $25,100
\r\nSchedule 2 150,000 129,400 20,600
\r\nThe computation of cost of goods sold in each schedule is based on the following data.
\r\nCost Total
\r\nUnits per Unit Cost
\r\nBeginning inventory, January 1 10,000 $4.00 $40,000
\r\nPurchase, January 10 8,000 4.20 33,600
\r\nPurchase, January 30 6,000 4.25 25,500
\r\nPurchase, February 11 9,000 4.30 38,700
\r\nPurchase, March 17 11,000 4.40 48,400
\r\nJane Torville, the president of the corporation, cannot understand how two different gross margins can be computed from the same set of data. As the vice president of finance, you have explained to Ms. Torville that the two schedules are based on different assumptions concerning the flow of inventory costs, i.e., FIFO and LIFO. Schedules 1 and 2 were not necessarily prepared in this sequence of cost flow assumptions.
\r\nInstructions
\r\nPrepare two separate schedules computing cost of goods sold and supporting schedules showing the composition of the ending inventory under both cost flow assumptions.