Cooke Industries Imports and Sells Quality Merchandise The Replacement Cost of the Merchandise Remained Constant Throughout 2012

Essay

Cooke Industries imports and sells quality merchandise. The company had the following layers in its LIFO inventory at January 1, 2012, at which time the replacement cost of the inventory was $600 per unit.
$$\begin{array} { | l | l | l } \hline \text { Year IIFO L.Gyer Added } & \text { Urits } & \text { UritCost } \\\hline 2009 & 40 & \$ 400 \\\hline 2010 & 40 & \$ 475 \\\hline 2011 & 50 & \$ 575 \\\hline & &\end{array}$$ The replacement cost of the merchandise remained constant throughout 2012. Cooke sold 300 units during 2012. The company established the selling price of each unit by doubling its replacement cost at the time of sale.
Required:
1. Determine the gross margin and the gross margin percentage for 2012 assuming that Cooke purchased 310 units during the year.
2. Determine the gross margin and the gross margin percentage for 2012 assuming that Cooke purchased 200 units during the year.
3. Explain why the assumed number of units purchased makes a difference in your answers.