Interpretive Question: Which alternative results in the highest gross margin? Why?

Pump-It, Inc., sells weight-lifting equipment. The sales and inventory records of the company for January through March 2003 were as follows:

Weight Sets

Unit Cost

Total Cost

Beginning inventory, Jan. 1

460

30

$13,800

Purchase, Jan. 16

110

32

3,520

Sale, Jan. 25 ($45 per set). .

216

Purchase, Feb. 16

105

36

3,780

Sale, Feb. 27 ($40 per set). .

307

Purchase, March 10

150

28

4,200

Sale, March 30 ($50 per set)

$190

Required

1. Determine the amounts for ending inventory, cost of goods sold, and gross margin under the following costing alternatives. Use the perpetual inventory method. Round amounts to the nearest dollar.

a. FIFO

b. LIFO

c. Average cost (calculate unit costs to the nearest cent)

2. Interpretive Question: Which alternative results in the highest gross margin? Why?

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