Question

The units of an item available for sale during the year were as follows: Jan. 1 Inventory 9 units at $47 $423 Aug. 13 Purchase 19 units at $50 950 Nov. 30 Purchase 13 units at $51 663 Available for sale 41 units $2,036 There are 16 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 (round per-unit cost to two decimal places and your final answer to the nearest whole dollar). a. First-in, first-out (FIFO) $ b. Last-in, first-out (LIFO) $ c. Weighted average cost

Answer 1

Answer:

a. First-in, first-out (FIFO) $813

b. Last-in, first-out (LIFO) $773

c. Weighted average cost $795

Explanation:

Date          transaction         units        unit cost           total cost

Jan. 1           Inventory         9 units       at $47              $423

Aug. 13        Purchase        19 units      at $50              $950

Nov. 30       Purchase        13 units       at $51              $663

Available for sale 41 units $2,036

Ending inventory 16 units

a. First-in, first-out (FIFO) $

ending inventory = (13 x $51) + (3 x $50) = $813

COGS and ending inventory are calculated based on the oldest units purchased

b. Last-in, first-out (LIFO) $

ending inventory = (9 x $47) + (7 x $50) = $773

COGS and ending inventory are calculated based on the last units purchased

c. Weighted average cost

ending inventory = ($2,036 / 41) x 16 = $795

COGS and ending inventory are calculated using an average