Question

Kirtland Corporation uses a periodic inventory system. At the end of the annual accounting period, December 31 , the accounting records for the most popular item in inventory showed the following:
Required:
Compute the amount of ( a ) goods available for sale, (b) ending inventory, and (c) cost of goods sold at December 31, under the following inventory costing methods (show computations and round to the nearest dollar):
(b) First-in, first-out.

Answer 1

Average Cost

Cost of average cost = cost of goods available for sale/ No. of units available for sale

114060/(400+300+460)

= $3.5

Cost of goods sold average cost =no. of units sold * average cost

= 860*3.5

= $3010

Ending inventory average cost =no. of units in ending inventory* average

(1160-860)*3.5

= $1050

FIFO

Cost of goods sold as per FIFO =no. of units sold * cost as per FIFO

(400*3)+(300*3.4)+(160*4)

= $2860.

The average cost is the unit cost of production obtained by dividing total cost (TC) by total production (Q). The unit cost of production means that all fixed and variable costs are considered when calculating the average cost. Hence, it is also called the total cost per unit.

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