Question

Computing Cost of Goods Sold and Ending Inventory Under FIFO, LIFO, and Average Cost
Assume that Madden Company reports the following initial balance and subsequent purchase of inventory.

Inventory balance at beginning of year 1,560 units @ $150 each $234,000

Inventory purchased during the year 2,040 units @ $180 each 367,200

Cost of goods available for sale during the year 3,600 units $601,200

Assume that 2,400 units are sold during the year. Compute the cost of goods sold for the year and the inventory on the year‑end balance sheet under the following inventory costing methods.

Find COGS and Ending Inventory for:

a. FIFO

B. LIFO

C. Average Cost

Answer 1

1.FIFO Method:

Reciepts	Cost of Goods Sold	Balance
Particulars	No.Of Units	Rate	Amount	No.Of Units	Rate	Amount	No.Of Units	Rate	Amount
Opening Balance of Inventory	1,560	$    150	$    2,34,000	1,560	$    150	$    2,34,000
Inventory Purchased during the year	2,040	$    180	$    3,67,200	840	$    180	$    1,51,200	1,200	$    180	$    2,16,000
Total Inventory	3,600		$   6,01,200	2,400		$   3,85,200	1,200		$   2,16,000

2.LIFO Method:

Reciepts	Cost of Goods Sold	Balance
Particulars	No.Of Units	Rate	Amount	No.Of Units	Rate	Amount	No.Of Units	Rate	Amount
Opening Balance of Inventory	1,560	$    150	$    2,34,000	360	$    150	$       54,000	1,200	$    150	$    1,80,000
Inventory Purchased during the year	2,040	$    180	$    3,67,200	2,040	$    180	$    3,67,200
Total Inventory	3,600		$   6,01,200	2,400		$   4,21,200	1,200		$   1,80,000

3.Average Cost:

Reciepts	Cost of Goods Sold	Balance
Particulars	No.Of Units	Rate	Amount	No.Of Units	Rate	Amount	No.Of Units	Rate	Amount
Opening Balance of Inventory	1,560	$    150	$    2,34,000
Inventory Purchased during the year	2,040	$    180	$    3,67,200
Total Inventory	3,600	$    167	$   6,01,200	2,400	$    167	$   4,00,800	1,200	$    167	$   2,00,400

Note:Average Cost Per Unit = Total Cost of Goods Available for Sale / Total Units,

=$6,01,200 / 3,600 Units,

=$167.