Question

Periodic Inventory Using FIFO, LIFO, and Weighted Average Cost Methods The units of an item available for sale during the year were as follows: Jan. 1 Inventory 13 units at $41 $533 Aug. 7 Purchase 19 units at $44 836 Dec. 11 Purchase 13 units at $46 598 45 units $1,967 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

Under the First in first out (FIFO) method of inventory valuation, Cost of goods sold consists of the units from beginning inventory and earliest purchases. Ending inventory consists of the units from recent purchases.

Ending inventory of 16 units consists of 13 units from December 11 purchases and 3 units from August 7 purchases.

Ending inventory = (13*$46) + (3*$44)

= $730

Under the Last in first out (LIFO) method of inventory valuation, Cost of goods sold consists of the units from recent purchases. Ending inventory consists of the units from beginning inventory and earliest purchases.

Ending inventory of 16 units consists of 13 units from Beginning inventory and 3 units from August 7 purchases.

Ending inventory = (13*$41) + (3*$44)

= $665

Cost per unit under Weighted average method = Cost of units available for sale / Number of units available for sale

= $1,967 / 45

= $43.71 (rounded to 2 decimal places)

Ending inventory = 16 * $43.71

= $700 (Rounded to the nearest dollar)