Reference no: EM132679456

Cast Iron Grills, Inc., manufactures premium gas barbecue grills. The company reports inventory and cost of goods sold based on calculations from a LIFO periodic inventory system.

Cast Iron's December 31, 2021, fiscal year-end inventory consisted of the following (listed in chronological order of acquisition):

Units     Unit Cost

9,000        $500

6,000         600

10,000        700

The replacement cost of the grills throughout 2022 was $800. Cast Iron sold 47,000 grills during 2022. The company's selling price is set at 200% of the current replacement cost.

Required:

Problem 1: Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2022 under two different assumptions. First, that Cast Iron purchased 48,000 units and, second, that Cast Iron purchased 25,000 units during the year.

Problem 2: Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2022 assuming that Cast Iron purchased 48,000 units (as per the first assumption) and 25,000 units (as per the second assumption) during the year and uses the FIFO inventory cost method rather than the LIFO method.