Question

Coronado Industries began the year with 12 units of marine floats at a cost of $11 each. During the year, it made the following purchases: May 5, 27 unit at $15; July 16, 20 units at $20; and December 7, 25 units at $23. Assume there are 30 units on hand at the end of the period. Coronado uses the periodic approach.
Required:
a. Determine the cost of goods sold under FIFO.
b. Determine cost of goods sold under LIFO.
c. Calculate the average unit cost.
d. Determine the cost of goods sold under the average cost.

Answer 1

Answer:

Explanation:

For computing each part, first we have to determine the sale units i.e

= (Opening units + purchased units) - closing units

= (12 units + 27 unit + 20 units + 25 units) - 30 units

= 54 units

a. The cost of goods sold under FIFO is

Since 54 units are sold and in this starting units would be considered

So 12 units would be taken at $11 each, 27 units would be taken at $15, and the remaining units i.e. 15 units would be taken at $20

So,

= 12 units × $11 + 27 units × $15 + 15 units × $20

= $132 + $405 + $300

= $837

b. The cost of goods sold under LIFO is

Since 54 units are sold and in this ending units would be considered

So 25 units would be taken at $23 each, 20 units would be taken at $20, and the remaining units i.e. 9 units would be taken at $15

So,

= 25 units × $23 + 20 units × $20 + 9 units × $15

= $575 + $400 + $135

= $1,110

c. The average unit cost is

= (12 units × $11) + (27 units × $15) + (20 units × $20) + (25 units × $23) ÷ (12 units + 27 units + 20 units + 25 units)

= ($132 + $405 +  $400 + $575) ÷ (84 units)

= $18 per unit

d. The cost of goods sold under the average cost is

= $18 per unit × 54 units

= $972