Question

Consider the following information for Maynor Company, which uses a periodic inventory system:

	Transaction	Units		Unit Cost			Total Cost
January 1	Beginning Inventory	19		$	69		$	1,311
March 28	Purchase	29			75			2,175
August 22	Purchase	38			79			3,002
October 14	Purchase	43			85			3,655
Goods Available for Sale		129					$	10,143

The company sold 43 units on May 1 and 38 units on October 28.

Required:

Calculate the company's ending inventory and cost of goods sold using the each of following inventory costing methods.

FIFO

LIFO

Weighted Average

Answer 1

Under periodic inventory system, inventory records are updated at the end of period.

Total Units sold

=

43+38

=

81

FIFO

LIFO

Weighted Average

Ending Inventory

$    4,050

$    3,486

$ 3,774

Cost of goods sold

$    6,093

$    6,657

$ 6,369

Working:

# 1

FIFO

FIFO stands for first-in-first-out. It means inventory bought first are recorded as sold first.

So, Cost of goods sold of 81 units are as follows:

Transaction

Units

Unit Cost

Total Cost

January 1

Beginning inventory

19

$          69

$                    1,311

March 28

Purchase

29

$          75

$                    2,175

August 22

Purchase

33

$          79

$                    2,607

Total

$                    6,093

Cost of ending Inventory is calculated as follows:

Cost

Cost of goods available for sale

$                 10,143

Less Cost of good sold

$                    6,093

Cost of Ending Inventory

$                    4,050

# 2

LIFO

LIFO stands for last in first out.It means inventory bought last is sold first.

So, Cost of goods sold of 81 units are as follows:

Transaction

Units

Unit Cost

Total Cost

October 14

Purchase

43

$          85

$                    3,655

August 22

Purchase

38

$          79

$                    3,002

Total

$                    6,657

Cost of ending Inventory is calculated as follows:

Cost

Cost of goods available for sale

$                 10,143

Less Cost of good sold

$                    6,657

Cost of Ending Inventory

$                    3,486

# 3

Weighted average cost per unit

=

$                 10,143

/

129

=

$       78.63

Cost of goods sold

81

x

$    78.63

=

$       6,369

Cost of Ending Inventory

48

x

$    78.63

=

$       3,774