Question

Cortez Company sells chairs that are used at computer stations. Its beginning inventory of chairs was 100 units at $60 per unit. During the year, Cortez made two batch purchases of this chair. The first was a 150-unit purchase at $68 per unit; the second was a 200-unit purchase at $72 per unit. During the period, it sold 270 chairs. Required Determine the amount of product costs that would be allocated to cost of goods sold and ending inventory, assuming that Cortez uses FIFO. LIFO. Weighted average.

Answer 1

Answer:

Kindly refer to the attached table for breakdown of answers

Explanation:

FIFO is a costing method that assigns costs to production based on a First in First out basis. Meaning the oldest stocks are transferred to production before the earlier purchased stock

LIFO is a costing method which assigns costs to production on the newness of the stock item, that is Last in First out. The latests stock is always the first to be transferred to production

Weighted Average attempts to find a mix between FIFO & LIFO by employing a uniform valuation based on total value of stock divided by the Quantity of stock available at every point in time.

Cost of Goods sold is the relative cost associated with the sales volume based on the cost method adopted of the 3 listed above

And Closing inventory is the valuation of the stock left over at year end based on the Costing method earlier employed.

Download xlsx

Answer 2

Answer:

FIFO

Cost of Goods Sold = $17640

Inventory = $12960

LIFO

Cost of Goods Sold = $19160

Inventory = $11440

Weighted Average

Cost of Goods Sold = $18360

Inventory = $12240

Explanation:

FIFO

FIFO stands for First In First Out, meaning that Inventory bought in first should be the first to be sold

Cost of Goods Sold = (100×60)+(150×68)+(20×72)

Inventory = 180 ×72

LIFO

LIFO stands for Last In First Out, meaning that the recent inventory is sold first

Cost of Goods Sold = (200×72)+(70×68)

Inventory = (80×68)+(100×60)

Weighted Average

A new unit cost of inventory is calculated on each purchase using the average

Cost of Goods Sold = (270×68)

Inventory = (180×68)