Topanga Group began operations early in 2018. Inventory purchase information for the quarter ended March 31, 2018, for Topangas only product is provided below. The unit costs include the cost of freight. The company uses a periodic inventory system.

Date of Purchase	Units		Unit Cost			Total Cost
Jan. 7	7,000		$	6.00			$	42,000
Feb. 16	28,000			7.00				196,000
March 22	32,000			8.00				256,000
Totals	67,000							494,000

Sales for the quarter, all at $10 per unit, totaled 39,000 units leaving 28,000 units on hand at the end of the quarter. Required: 1. Calculate Topanga's cost of goods sold for the first quarter using:

1. FIFO
2. LIFO
3. Average cost

2. Calculate Toponga'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.

Req 1A

Calculate Topanga's cost of goods sold for the first quarter using FIFO.

FIFO: Cost of Goods Available for Sale Cost of Goods Sold - Periodic FIFO Ending Inventory - Periodic FIFO # of units Cost per unit Cost of Goods Available for Sale # of units sold Cost per unit Cost of Goods Sold # of units in ending inventory Cost per unit Ending Inventory Beginning Inventory $0.00 $0 $0.00 $0 Purchases: January 7 7,000 $6.00 42,000 $6.00 0 $6.00 0 February 16 28,000 $7.00 196,000 $7.00 0 $7.00 0 March 22 32,000 $8.00 256,000 $8.00 0 $8.00 0 Total 67,000 $494,000 0 $0 0 $0

Req 1B

Calculate Topanga's cost of goods sold for the first quarter using LIFO.

LIFO Cost of Goods Available for Sale Cost of Goods Sold - Periodic LIFO Ending Inventory - Periodic LIFO # of units Cost per unit Cost of Goods Available for Sale # of units sold Cost per unit Cost of Goods Sold # of units in ending inventory Cost per unit Ending Inventory Beginning Inventory $0 $0.00 $0 $0.00 $0 Purchases: January 7 0 $0.00 0 $0.00 0 February 16 0 $0.00 0 $0.00 0 March 22 0 $0.00 0 $0.00 0 Total 0 $0 0 $0 0 $0

Req 1C

Calculate Topanga's cost of goods sold for the first quarter using average cost. (Round your intermediate calculations to 4 decimal places for average cost method and final answers to the nearest whole number.)

	Average Cost Cost of Goods Available for Sale Cost of Goods Sold - Average Cost Ending Inventory - Average Cost # of units Unit Cost Cost of Goods Available for Sale # of units sold Average Cost per Unit Cost of Goods Sold # of units in ending inventory Average Cost per unit Ending Inventory Beginning Inventory Purchases: January 7 February 16 March 22 Total 0 $0 $0 $0

Req 2

Calculate Toponga's gross profit ratio for the first quarter using FIFO, LIFO, and Average cost.

	Choose Numerator: Choose Denominator: = Gross Profit Ratio = Gross profit ratio FIFO = 0 LIFO = 0 Average cost = 0

Req 3

Comment on the relative effect of each of the three inventory methods on the gross profit ratio.

	In situations when costs are rising, LIFO results in a cost of goods sold and therefore, a gross profit ratio than FIFO.