Buntzell Industrial Supplies distributes industrial equipment. The company’s fiscal year ends on March 31, 2017. One department in the company had 50 items that cost $540 each on hand at January 1, 2017. During the quarter, the department purchased merchandise on account as follows:
Sales for each month in the quarter were as follows:
Operating expenses in the quarter were $95,000.
Assume that the company uses a perpetual inventory system. Also assume that monthly purchases of inventory occur on the first day of each month.
Required
1. Determine the cost of the department’s at March 31, 2017, under
(a) Moving-weighted-average cost
(b) FIFO cost.
2. Prepare the department’s income statement for the quarter ended March 31, 2017, under each method described in Requirement 1. Show totals for gross margin and operating income and note the difference, if any.
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