# Answered Essay: Rock Slide is a distributor that assembles power units. Using the material presented in Schedules A and Schedule B:

Rock Slide is a distributor that assembles power units. Using the material presented in Schedules A and Schedule B:

(1) Determine Rock Slide’s cost of goods sold and the ending inventory using the inventory costing methods of FIFO, LIFO, and Weighted Averages;

(2) Determine Rock Slide’s gross profit (margin) using the inventory costing methods of

FIFO, LIFO and Weighted Averages;

S c h e d u l e A A s s e m b l y o f P o w e r U n i t s Rock Slide

 Assembly Activity Units Cost/Unit Total Cost Beginning Inventory 1/1/12 70 \$105 \$7,350 Assembly Units Placed Into Inventory 2/15/12 85 \$110 \$9,350 4/20/12 90 \$112 \$10,080 9/18/12 65 \$112 \$7,280 11/16/12 110 \$112 \$12,320 12/20/12 80 \$120 \$9,600 Total Assembled Units Available for Sale- 2012 500 \$55,980

Schedule B

Sales of Power Units Rock Slide

 Sales Activity Units Unit Sales Price Total Sales 1/15/12 60 \$145 \$8,700 3/20/12 80 \$150 \$12,000 5/2/12 100 \$150 \$15,000 10/8/12 60 \$150 \$9,000 11/30/12 110 \$150 \$16,500 12/28/12 30 \$175 \$5,250 Total 2012 Sales 440 \$66,450

Solutions for 1 & 2 are :

FIFO method :

Value of Closing Inventory = 60 units * latest inventory cost ie. \$120 = \$7200

COGS = value of units available for sale – value of closing units = \$55980 – \$7200 = \$48780

Gross Profit = Total Sales – COGS = \$66450 – \$48780 = \$17670

LIFO method :

Value of Closing Inventory = 60 units * initial inventory cost ie. \$105 = \$6300

COGS = value of units available for sale – value of closing units = \$55980 – \$6300 = \$49680

Gross Profit = Total Sales – COGS = \$66450 – \$49680 = \$16770

Weighted Average method :

Value of Closing Inventory = 60 units * weighted average inventory cost ie. \$(55980/500) = 60 * \$111.96 = \$6718

COGS = value of units available for sale – value of closing units = \$55980 – \$6718 = \$49262

Gross Profit = Total Sales – COGS = \$66450 – \$49262 = \$17188

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