Question

The following information is available from ABC co.'s inventory records for March 2020.

	# of units	unit costs	unit price
March 1, 2020	2,000	$10
Purchases on 3/5	3,000	11
Sales on 3/10	4,000		$20
Purchase on 3/15	6,000	12
Sales on 3/25	5,000		$20

Instructions: Compute the costs of goods sold for March 2020 using the following methods.

a) FIFO with perpetual inventory.

b) Weighted average. (Periodic system).

c) Moving average. (Perpetual system).

d) LIFO with periodic inventory.

e) LIFO with perpetual inventory.

Answer 1

(a) FIFO with perpetual inventory

Sales	Goods purchased on	Workings	Cost of goods sold
March 10 - 4,000 units	March 1 - 2,000 units March 5 - 2,000 units	(2,000 x 10) + (2,000 x 11)	42,000
March 25 - 5,000 units	March 5- 1,000 units March 15- 4,000 units	(1,000 x 11) + (4,000 x 12)	59,000
Cost of goods sold			101,000

(b) Weighted average (Periodic system)

	No. of units purchased	Total value
March 1	2,000	20,000
March 5	3,000	33,000
March 15	6,000	72,000
Total	11,000	125,000

Thus, weighted avg cost per unit = 125,000/ 11,000 = 11.36 per unit

Number of units sold = 4,000 + 5,000 = 9,000 units

Cost of goods sold = 9,000 x 11.36 = $102,240

(c)

Date	Qty purchased	Unit cost	Price	Qty sold	Unit cost	Price	Balance units	Unit cost	Price
1							2,000	10	20,000
3	3,000	11	33,000				5,000	10.60	53,000
10				4,000	10.60	42,400	1,000	10.60	10,600
15	6,000	12	72,000				7,000	11.80	82,600
25				5,000	11.80	59,000	2,000	11.80	23,600

Cost of goods sold = 42,400 + 59,000 = 101,400

(d) LIFO with periodic inventory

Units sold = 9,000

	Workings	Cost of goods sold
Purchased on March 15	6,000 x 12	72,000
Purchase on March 5	3,000 x 11	33,000
Cost of goods sold		105,000

(e) LIFO with perpetual inventory

Sales	Goods purchased on	Workings	Cost of goods sold
March 10 - 4,000 units	March 5 - 3,000 units March 1 - 1,000 units	(3,000 x 11) + (1,000 x 10)	43,000
March 25 - 5,000 units	March 15- 5,000 units	5,000 x 12	60,000
Cost of goods sold			103,000