Question

The units of an item available for sale during the year were as follows: Jan. 1 Inventory 20 units at $360 $ 7,200 Aug. 13 Purchase 260 units at $342 88,920 Nov. 30 Purchase 40 units at $357 14,280 Available for sale 320 units $110,400 There are 57 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost using (a) the first-in, first-out (FIFO) method; (b) the last-in, first-out (LIFO) method; and (c) the weighted average cost method.

Answer 1

Explanation:

The computation of the ending inventory using the each method is shown below:

a. FIFO

Since the 57 units is in physical inventory so 40 units should be taken at $357 i.e from latest purchase and the remaining 17 units is at $342

= 40 units × $357 + 17 units × $342

= $20,094

b. LIFO

Since the 57 units is in physical inventory so 20 units should be taken at $360 and the rest 37 units at $342

= 20 units × $360 + 37 units × $342

= $19,854

c. Weighted average cost method

= Weighted average cost per unit × ending inventory units

where,

Weighted average cost per unit is

= $110,400 ÷ 320 units

= $345

And, the ending inventory units is 57 units

So, the ending inventory is

= 57 units  $345

= $19,665