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3 years ago

Arrow Company is a retailer that uses the perpetual inventory system.

Business

1 answer:

PSYCHO15rus [73]3 years ago

3 0

Answer:

a, Inventory cost under First in first out- FIFO = $ 4,628

b. Inventory cost under Last in First Out LIFO = $ 4,378

c. Inventory cost under Weighted average cost = $ 4,494

Explanation:

The data need to be summarised

Units Per Unit Cost Total value

August 1 Opening inventory 80 $ 1,600

August 5 Purchases 100 $ 2,116

August 11 Purchases 200 $ 4,416

Weighted average cost 380 $ 21.4 $ 8,132

August 11 Sales (170)

Units in hand after Aug 11 sales 210

Computation on inventory cost under FIFO method

Under FIFO method the cost of goods sold are considered from the opening inventory and the first purchases. The inventory on hand is from the last purchases.

The inventory on hand of 210 units, of which 200 units are from August 11 and 10 units from the purchases of August 5.

The average unit cost of Aug 11 purchases is $ 4,416/ 200 units = $ 22.08

The average unit cost of Aug 05 purchases is $ 2,116 /100 units = $ 21.16

200 units * $ 22.08 = $ 4,416.00

10 units * $ 21.16 = $ 211.60

$ 4627.60 say $ 4,628

Computation on inventory cost under LIFO method

Under LIFO method the cost of goods sold are considered from the last purchases and the inventory on hand is from the opening inventory and first purchases.

The inventory on hand of 210 units is as follows

Opening inventory 80 units $ 1,600

Purchases August 5 100 units $ 2,116

Purchases August 11 30 [email protected] $22.08 $ 662.40

Inventory under LIFO Method $ 4,378.40

Computation on inventory cost under Weighted Average method

The weighted average cost of inventory is 210 units * $ 21.40 = $ 4,494

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Answer:

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