Question

The Rock Shop shows the following data related to an item of inventory:Inventory, January 1100 units @ $5.00Purchase, January 9300 units @ $5.40Purchase, January 19100 units @ $6.00Inventory, January 31150 units Instructions

(a)What value should be assigned to the ending inventory using FIFO?

(b)What value should be assigned to cost of goods sold using Average Cost?

Answer 1

A)

Cosing units = op stock + purchases - sales

150 = 100+300+100 -sales

Sales = 350

As per FIFO

Ending inventory   = 100*6 + 50*5.40

= 270 + 600

= $870

B)

Cost of good sold using Average cost

Average inventory cost = (100*5 + 300*5.4 + 100*6)/500

= 5.44

Cost of good sold = $2720 - 150*5.44

= $1,904