# MGAB01H3 Lecture Notes - Lecture 13: Gross Profit, Internal Control, Fixed Cost

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Published on 28 Nov 2018
School
Course
Professor
Chapter7 reporting and interpreting cost of sales and inventory
1. Hw5 and quiz need to submit before Sunday night
2. Final: Friday,21th DEC, 9-11
3. Different version for three different professors
4. Periodic system easier to calculate
Review:
Why we need to study inventory for whole chapter: the way we use to measure the cost of
inventory.
Perpetual system: keep a running balance of inventory, COGS is based on every transaction
Periodic: count once at end of the period
Problem1
units
FIFO
WAC
Beginning balance
of inventory
600
600*1=600
600
Purchase
800
300*2+500*4=2600
2600
COG available for
sale
1400
3200
3200
Ending balance
900
2700
2.285*900=2057
COGS
500
500
2.285*500=1143
Gross profit
2200
1557
* you can start from calculating 900 units ending balance by grabbing them from the newest
inventory or start from COGS when using FIFO
*WAC= 3200/1400=2.285 because we use periodic, we don’t care when we purchase and sale
Gross profit: revenue-COGS
Revenue=400*5+100*7=2700
Problem2
2010
units
FIFO
WAC
BB INVENTORY
0
0
0
purchase
2300
1200*10+700*12+400*13=25600
25600
COG available
for sale
2300
25600
25600
Ending balance
500
400*13+100*12=6400
500*11.13=5565
COGS
1800
1200*10+600*12=19200
1800*11.13=20035
Gross profit
13200
12365
2011
BB inventory
500
6400
5565
purchase
2300
600*15+1200*1600+500*18=37200
37200
COG available
for sale
2800
43600
42765
Ending balance
0
0
0
COGS
2800
43600
42765
Gross profit
18000
18835
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