Topanga Group began operations early in 2021. Inventory purchase information for the quarter ended March 31, 2021, for Topanga’s only product is provided below. The unit costs include the cost of freight. The company uses a periodic inventory system to report inventory and cost of goods sold. Date of PurchaseUnits Unit CostTotal CostJan. 75,000 $6.00 $30,000 Feb. 1614,000 7.00 98,000 March 2218,000 8.00 144,000 Totals37,000 $272,000 Sales for the quarter, all at $9 per unit, totaled 20,000 units leaving 17,000 units on hand at the end of the quarter. Required:1. Calculate Topanga's cost of goods sold for the first quarter using:FIFOLIFOAverage cost2. Calculate Topanga's gross profit ratio for the first quarter using FIFO, LIFO, and Average cost.3. Comment on the relative effect of each of the three inventory methods on the gross profit ratio.

Name: Topanga Group began operations early in 2021. Inventory purchase infor
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Description: Topanga Group began operations early in 2021. Inventory purchase information for the quarter ended March 31, 2021, for Topanga’s only product is provided below. The unit costs include the cost of freight. The company uses a periodic inventory system

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Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter5: Inventories And Cost Of Goods Sold

Section: Chapter Questions

Problem 5.11E: Inventory Costing Methods VanderMeer Inc. reported the following information for the month of...

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Topanga Group began operations early in 2021. Inventory purchase information for the quarter ended March 31, 2021, for Topanga’s only product is provided below. The unit costs include the cost of freight. The company uses a periodic inventory system to report inventory and cost of goods sold.

Date of Purchase	Units	Unit Cost	Total Cost
Jan. 7	5,000	$	6.00	$	30,000
Feb. 16	14,000		7.00		98,000
March 22	18,000		8.00		144,000
Totals	37,000			$	272,000

Sales for the quarter, all at $9 per unit, totaled 20,000 units leaving 17,000 units on hand at the end of the quarter.

Required:
1. Calculate Topanga's cost of goods sold for the first quarter using:

FIFO
LIFO
Average cost

2. Calculate Topanga's gross profit ratio for the first quarter using FIFO, LIFO, and Average cost.
3. Comment on the relative effect of each of the three inventory methods on the gross profit ratio.

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