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14)
14). Sunland Company uses a periodic inventory system. Details for the inventory account for the month of January 2022 are as follows:
Units Per unit price Total
Balance, 1/1/2022 290 $5.00 $1450
Purchase, 1/15/2022 140 ..5.10 714
Purchase, 1/28/2022 140 ..5.30 742
An end of the month (1/31/2022) inventory showed that 230 units were on hand. If the company uses FIFO and sells the units for $10 each, what is the gross profit for the month?
Expert Solution
14). Computation of the gross profit:-
Number of units sold = Number of units available for sale - Ending inventory
= (290 + 140 + 140) - 230
= 570 - 230
= 340 units
Cost of goods available for sale = Number of units sold * Selling price per unit
= 340 * $10
= $3,400
Cost of goods sold = (290 * $5) + ((340 - 290) * $5.10)
= $1,450 + $255
= $1,705
Gross profit = Cost of goods available for sale - Cost of goods sold
= $3,400 - $1,705
= $1,695
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