Question

Inventory by Three Methods; Cost of Goods Sold

The units of an item available for sale during the year were as follows: Jan. 1 Inventory 50 units at $96
Mar. 10 Purchase 70 units at $104
Aug. 30 Purchase 10 units at $108
Dec.12 Purchase 70 units at $114
There are 80 units of the item in the physical inventory at December 31 . The periodic inventory system is used.
Determine the ending inventory cost and the cost of goods sold by three methods. In your calculations round average unit cost to the nearest cent, and roun dall other calculations and your final answer to the nearest dollar. Cost of Endingg Inventory and Cost of Goods Sold
Inventory Method Ending Inventory Cost of Good Sold
First-in, first-out(FIFO) $_____ $______
Kast-in, first-out(LIFO) ______ _______
Weighted average cost ______ _______

Answer 1

To calculate ending inventory costs and COGS, FIFO, LIFO, and Weighted Average methods were used. FIFO resulted in an ending inventory of $9,060 and COGS of $10,440, LIFO showed $7,920 for ending inventory and COGS of $11,180, and Weighted Average gave an ending inventory of $7,792 and COGS of $11,688.

Step-by-step explanation:

To determine the ending inventory cost and the cost of goods sold (COGS) under three inventory valuation methods, we will use the FIFO, LIFO, and Weighted Average Cost methods. The data shows a company has various purchases throughout the year and a remaining inventory at the end of the year.

First-in, First-out (FIFO)

Under FIFO, the earliest goods purchased are the first to be sold. The ending inventory would be composed of the most recent purchases. The calculation would show:

70 units at $114 = $7,980

10 units at $108 = $1,080

Total = $9,060

Thus, COGS = (50 units at $96) + (70 units at $104) + (10 units out of 70 purchased on Dec. 12 at $114) = $10,440.

Last-in, First-out (LIFO)

Under LIFO, the most recent goods purchased are the first to be sold. Here, the ending inventory is made up of the oldest stock:

50 units at $96 = $4,800

30 units at $104 = $3,120

Total = $7,920

COGS = (40 units at $104) + (10 units at $108) + (70 units at $114) = $11,180.

Weighted Average Cost

To find the weighted average cost per unit, sum the total cost of goods available for sale and divide it by the total units available:

Total Cost = (50 units at $96) + (70 units at $104) + (10 units at $108) + (70 units at $114) = $19,480

Number of Units = 50 + 70 + 10 + 70 = 200

Weighted Average Cost per Unit = $19,480 / 200 = $97.40

Ending Inventory = 80 units at $97.40 = $7,792

COGS = Total Cost - Ending Inventory Value = $19,480 - $7,792 = $11,688.