Question

Causwell Company began 2021 with 13,000 units of inventory on hand. The cost of each unit was $6.00. During 2021 an additional 30,000 units were purchased at a single unit cost, and 23,000 units remained on hand at the end of 2021 (20,000 units therefore were sold during 2021). Causwell uses a periodic inventory system. Cost of goods sold for 2021, applying the average cost method, is $150,000. The company is interested in determining what cost of goods sold would have been if the FIFO or LIFO methods were used.
1. Determine the cost of goods sold for 2021 using the FIFO method. [Hint: Determine the cost per unit of 2021 purchases.] (Do not round intermediate calculations.)

Answer 1

The cost of Goods Sold - FIFO is 120000 and the cost of Goods Sold - LIFO is 120000.

How is the cost of goods sold for 2021 using the FIFO method calculated?

Per Unit Average Cost:

= Cost of Goods Sold with Average Cost ÷ Total Units Sold

= 150,000 ÷ 20,000

=7.5

Cost of Goods Available for Sales:

= (Total of Inventory + Purchased Units) × Per Unit Average Cost

= 43,000 × 6.00

= 258000

Cost of Units Purchased in 2021:

= Cost of Goods Available for Sale - Opening Inventory × Unit Cost

=258000 - 13,000 ×6

=180000

Per Units Cost of Units Purchased in 2021:

= Cost of Units Purchased in 2021 ÷ Total Units Purchased

=  180000 ÷ 30,000

= 6

Part 1:

Cost of Goods Sold - FIFO

Cost of Goods Sold:

= (Opening Inventory × Unit Cost) +  (30,000 - 23,000) × Per Units Cost of Units Purchased in 2021

= 13,000 × 6 + 7,000 × 6

= 120000

Part 2:

Cost of Goods Sold - LIFO

Cost of Goods Sold:

= units sold in 2021 × Per Units Cost of Units Purchased in 2021

= 20,000 × 6.00

= 120000

To learn more about FIFO method, refer

brainly.com/question/13827586

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