Music Unlimited carries a large inventory of guitars and other musical instruments. The store uses a perpetual inventory system. Company records indicate the following for a particular line of guitars. Gross margin under FIFO is S Date Item Quantity Unit Cost Gross margin under weighted-average-cost is S. Nov. 1 6 Balance 4 $980 Sale 2 Purchase 13 910 The moving-weighted-average-cost method produces a V cost of goods sold (and therefore a higher gross 17 Sale margin) because unit inventory costs are V in this scenario. While V counts 30 Purchase 910 the earlier inventory first, the V method uses all inventory on hand determining the The sale price of each guitar was $1,640. cost of goods sold. E (Click the icon to view the cost of goods sold calculation from the FIFO perpetual inventory record.) E (Click the icon to view the cost of goods sold calculation from the moving-weighted-average-cost perpetual inventory record.) Required Calculate the gross margin for Music Unlimited Store under both the FIFO and the moving-weighted-average-cost methods. Explain why the gross margin is higher under the moving-weighted-average-cost method.
Music Unlimited carries a large inventory of guitars and other musical instruments. The store uses a perpetual inventory system. Company records indicate the following for a particular line of guitars. Gross margin under FIFO is S Date Item Quantity Unit Cost Gross margin under weighted-average-cost is S. Nov. 1 6 Balance 4 $980 Sale 2 Purchase 13 910 The moving-weighted-average-cost method produces a V cost of goods sold (and therefore a higher gross 17 Sale margin) because unit inventory costs are V in this scenario. While V counts 30 Purchase 910 the earlier inventory first, the V method uses all inventory on hand determining the The sale price of each guitar was $1,640. cost of goods sold. E (Click the icon to view the cost of goods sold calculation from the FIFO perpetual inventory record.) E (Click the icon to view the cost of goods sold calculation from the moving-weighted-average-cost perpetual inventory record.) Required Calculate the gross margin for Music Unlimited Store under both the FIFO and the moving-weighted-average-cost methods. Explain why the gross margin is higher under the moving-weighted-average-cost method.
Financial Accounting
15th Edition
ISBN:9781337272124
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Carl Warren, James M. Reeve, Jonathan Duchac
Chapter7: Inventories
Section: Chapter Questions
Problem 7PA: Selected data on merchandise inventory, purchases, and sales for Celebrity Tan Co. and Ranchworks...
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