Army-Navy Surplus Ltd. began March 2011 with 70 tents that cost $20 each. During the month, Army-Navy Surplus made the following purchases at cost:
March 4 100 tents @ $22 = $2,200
March 19 160 tents @ $24 = $3,840
March 25 40 tents @ $25 = $1,000
Army-Navy Surplus sold 320 tents, and at March 31 the ending inventory consists of 50 tents. The sale price of each tent was $45.
Required
1. Determine the cost of goods sold and ending inventory amounts for March under
(a) weighted-average cost and (b) FIFO cost. Round weighted-average cost per unit to four decimal places, and round all other amounts to the nearest dollar.
2. Explain why cost of goods sold is highest under weighted-average cost. Be specific.
3. Prepare Army-Navy Surplus' income statement for March 2011. Report gross profit. Operating expenses totalled $4,000. Army-Navy Surplus uses weighted-average costing for inventory. The income tax rate is 21%.