ACCA Applied Knowledge · Management Accounting · Accounting for material, labour and overheads
Dalmore Ltd had opening inventory of 200 units at $8. It bought 300 units at $9 and later 500 units at $10. It sold 600 units for $15 each. Using periodic LIFO (issues taken from the latest purchases first), what is the gross profit for the period?
Gross profit under LIFO is $3,100. Sales are $9,000. Cost of sales takes the latest purchases first: 500 units at $10 and 100 at $9, totalling $5,900. Subtracting this from sales leaves $3,100.
- A$3,000
- B$3,100Correct
- C$3,420
- D$3,700
Explanation
Sales are 600 × $15 = $9,000. LIFO cost of sales is 500 × $10 + 100 × $9 = $5,900. Gross profit is $9,000 − $5,900 = $3,100. $3,700 is the FIFO profit (cost of sales $5,300). $3,420 is the AVCO profit (cost of sales 600 × $9.30 = $5,580). $3,000 prices all units at $10.
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