Question & Answer: he following information pertains to Mason Company for 2016:…..

The following information pertains to Mason Company for 2016:

Beginning inventory	96	units	@	$	20
Units purchased	318	units	@	$	30

Ending inventory consisted of 32 units. Mason sold 382 units at $60 each. All purchases and sales were made with cash. Operating expenses amounted to $3,000

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1. Compute the gross margin for Mason Company using the following cost flow assumptions: (1) FIFO, (2) LIFO, and (3) weighted average. (Round cost per unit to 3 decimal places and final answers to the nearest whole dollar amount.)

2. What is the amount of net income using FIFO, LIFO, and weighted average? (Ignore income tax considerations.) (Round cost per unit to 3 decimal places and other intermediate answer and final answers to the nearest whole dollar amount.)

3. Compute the amount of ending inventory using (1) FIFO, (2) LIFO, and (3) weighted average. (Round cost per unit to 3 decimal places and final answers to the nearest whole dollar amount.)

Expert Answer

Answer.

Cost of Goods Available for Sale
Explanation	Units	Unit Cost	Total Cost
Op. Inventory	96	20.00	1,920
Purchases	318	30.00	9,540
Total	414		11,460


Calculation of Value of Sales
Explanation	Units	Unit Cost	Total Cost
Sales	382	60.00	22,920
Total	382		22,920

Ending Inventory (In Units) = 32 Units


1. FIFO Method

Value of Ending Inventory
Date	Units	Unit Cost	Total Cost
Purhases	32	30.00	960
Total	32		960


Cost of Goods Sold:
Cost of Goods available for sale			11,460
Less: Ending Inventory			960
Cost of Goods Sold			10,500


2. LIFO Method

Value of Ending Inventory
Date	Units	Unit Cost	Total Cost
Beg. Inv.	32	20.00	640
Total	32		640


Cost of Goods Sold:
Cost of Goods available for sale			11,460
Less: Ending Inventory			640
Cost of Goods Sold			10,820


3. Average Cost

Average Cost Per Unit = $11,460 (Cost of goods available for sale) / 414 Units ( Units Available for Sale)
Average Cost Per Unit = $27.68116 or say $27.681 per Unit (Approx.)

Value of Ending Inventory = 32 Units X $27.681
Value of Ending Inventory = $885.7971 or say $886 (Approx.)

Cost of Goods Sold:
Cost of Goods available for sale			11,460
Less: Ending Inventory			886
Cost of Goods Sold			10,574


Answer 1.

	FIFO	LIFO	Weighted Average
Sales	22,920	22,920	22,920
Cost of Goods Sold	10,500	10,820	10,574
Gross Margin	12,420	12,100	12,346


Answer 2.

	FIFO	LIFO	Weighted Average
Gross Margin	12,420	12,100	12,346
Operating Expenses	3,000	3,000	3,000
Net Operating Income	9,420	9,100	9,346


Answer 3.

	FIFO	LIFO	Weighted Average
Value of Ending Inventory	960	640	886

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