Question

Presented below is information related to Blowfish radios for the Culver Company for the month of July.

Date	Transaction	Units In	Unit cost	Total	Units Sold	Selling Price	Total
July 1	Balance	150	$4.20	$630
6	Purchase	1,200	$4.30	$5,160
7	Sale				450	$6.90	$3,105
10	Sale				450	$7.20	$3,240
12	Purchase	600	$4.60	$2,760
15	Sale				300	$7.30	$2,190
18	Purchase	450	$4.70	$2,115
22	Sale				600	$7.30	$4,380
25	Purchase	750	$4.68	$3,510
30	Sale				300	$7.40	$2,220
	Totals	3,150		$14,175	2,100		$15,135

a. Calculate average cost per unit. (Round answer to 2 decimal places, e.g. 2.76.)

Weighted-Avergage Cost =

b. Assuming that the periodic inventory method is used, compute the inventory cost at July 31 under each of the following cost flow assumptions. (Round answers to 0 decimal places, e.g. 6,578.)

(1) FIFO.
(2) LIFO.
(3) Weighted-average.

	(1) FIFO	(2) LIFO	(3) Weighted Average
Ending Inventory at July 31	$	$	$

c. Which of the methods used above (FIFO, LIFO, or WEIGHTED AVERAGE) will yield the lowest figure for gross profit for the income statement?

d. Which of the methods used above (FIFO, LIFO, or WEIGHTED AVERAGE) will yield the lowest figure for ending inventory for the balance sheet?

Answer 1

Ans.	Available for sale:
	Date	Transactions	Units	Cost per unit	Total
	1-Jul	Beginning inventory	150	4.2	630
	6-Jul	Purchases	1200	4.3	5160
	12-Jul	Purchases	600	4.6	2760
	18-Jul	Purchases	450	4.7	2115
	25-Jul	Purchases	750	4.68	3510
	Total		3150		14175
Ans.a	Weighted average cost per unit = Total cost of goods available for sale / total units available for sale
			14175 / 3150
			4.50 per unit
Ans.b		FIFO	LIFO	WEIGHTED AVERAGE
	Ending inventory at july 31	4920	4500	4725
	Ending inventory units =   No. of units available for sale - Sold units
			3150 - 2100
			1050
1	FIFO:
	*Cost of ending inventory:
	Date	Units	Rate	Cost
	25-Jul	750	4.68	3510
	18-Jul	300	4.7	1410
	Total	1050		4920
	Cost of goods sold =   Total cost of goods available for sale - Cost of ending inventory
			14175 - 4920
			9255
2	LIFO:
	*Cost of ending inventory:
	Date	Units	Rate	Cost
	1-Jul	150	4.2	630
	6-Jul	900	4.3	3870
	Total	1050		4500
	*Cost of goods sold   = Total cost of goods availble for sale - Cost of ending inventory
			14175 - 4500
			9675
3	Weighted average :
	Cost of ending inventory = Ending inventory units * Average cost per unit
			1050 * 4.5
			4725
	Cost of goods sold = Units sold * Average cost per unit
			2100 * 4.5
			9450
Ans.c	LIFO method will yield the lowest figure (5460) of gross profit.
		FIFO	LIFO	WEIGHTED AVERAGE
	Sales	15135	15135	15135
	Less: Cost of goods sold	9255	9675	9450
	Gross profit	5880	5460	5685
Ans.d	LIFO method will yield the lowest figure (4500) of ending inventory.
		FIFO	LIFO	WEIGHTED AVERAGE
	Ending inventory	4920	4500	4725