Questions: Boxwood Company sells blankets for 60 each. The following information was taken from the inventory records during May. The company had no beginning inventory on May 1. Boxwood uses a perpetual inventory system. Date Blankets Units Cost May 3 Purchase 5 20 10 Sale 3 17 Purchase 10 20 Sale 6 23 Sale 3 30 Purchase 10 Determine the gross profit for the month of May using the LIFO costing method. 348 452 444 356

Boxwood Company sells blankets for 60 each. The following information was taken from the inventory records during May. The company had no beginning inventory on May 1. Boxwood uses a perpetual inventory system.
Date Blankets Units Cost
May 3 Purchase 5 20
10 Sale 3
17 Purchase 10
20 Sale 6
23 Sale 3
30 Purchase 10

Determine the gross profit for the month of May using the LIFO costing method.
348
452
444
356

Transcript text: Boxwood Company sells blankets for $\$ 60$ each. The following information was taken from the inventory records during May. The company had no beginning inventory on May 1. Boxwood uses a perpetual inventory system. \begin{tabular}{|c|l|c|c|} \hline Date & \multicolumn{1}{|c|}{ Blankets } & Units & Cost \\ \hline May 3 & Purchase & 5 & $\$ 20$ \\ \hline 10 & Sale & 3 & \\ \hline 17 & Purchase & 10 & \\ \hline 20 & Sale & 6 & \\ \hline 23 & Sale & 3 & \\ \hline 30 & Purchase & 10 & \\ \hline \end{tabular} Determine the gross profit for the month of May using the LIFO costing method. \$348 \$452 \$444 \$356

Solution

Solution Steps

To determine the gross profit for the month of May using the LIFO (Last-In, First-Out) costing method, we need to follow these steps:

Track the inventory purchases and sales.
Apply the LIFO method to calculate the cost of goods sold (COGS) for each sale.
Calculate the total revenue from sales.
Subtract the total COGS from the total revenue to get the gross profit.

Step 1: Calculate Cost of Goods Sold (COGS)

Using the LIFO method, we calculate the COGS for each sale. The inventory after purchases is as follows:

May 3: Purchased 5 blankets at \$20 each.
May 17: Purchased 10 blankets at \$20 each.
May 30: Purchased 10 blankets at \$20 each.

The inventory before sales is: \[ \text{Inventory} = [20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20] \]

For the sales:

On May 10, 3 blankets are sold, costing \$20 each (from the last purchase): \[ \text{COGS} = 3 \times 20 = 60 \]
On May 20, 6 blankets are sold, costing \$20 each: \[ \text{COGS} = 6 \times 20 = 120 \]
On May 23, 3 blankets are sold, costing \$20 each: \[ \text{COGS} = 3 \times 20 = 60 \]

Total COGS: \[ \text{Total COGS} = 60 + 120 + 60 = 240 \]

Step 2: Calculate Total Revenue

The total revenue from sales is calculated as follows:

For the sale on May 10 (3 blankets): \[ \text{Revenue} = 3 \times 60 = 180 \]
For the sale on May 20 (6 blankets): \[ \text{Revenue} = 6 \times 60 = 360 \]
For the sale on May 23 (3 blankets): \[ \text{Revenue} = 3 \times 60 = 180 \]

Total revenue: \[ \text{Total Revenue} = 180 + 360 + 180 = 720 \]

Step 3: Calculate Gross Profit

Gross profit is calculated by subtracting the total COGS from the total revenue: \[ \text{Gross Profit} = \text{Total Revenue} - \text{Total COGS} = 720 - 240 = 480 \]