Question

Problem 6-2AA Periodic: Alternative cost flows LO P3

[The following information applies to the questions displayed below.]

Warnerwoods Company uses a periodic inventory system. It entered into the following purchases and sales transactions for March.  

Date

Activities

Units Acquired at Cost

Units Sold at Retail

Mar.

1

Beginning inventory

125

units

@ $60 per unit

Mar.

5

Purchase

425

units

@ $65 per unit

Mar.

9

Sales

445

units

@ $95 per unit

Mar.

18

Purchase

170

units

@ $70 per unit

Mar.

25

Purchase

250

units

@ $72 per unit

Mar.

29

Sales

210

units

@ $105 per unit

Totals

970

units

655

units

For specific identification, the March 9 sale consisted of 80 units from beginning inventory and 365 units from the March 5 purchase; the March 29 sale consisted of 65 units from the March 18 purchase and 145 units from the March 25 purchase.

Problem 6-2AA Part 3

3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. (Round your average cost per unit to 2 decimal places.)

4. Compute gross profit earned by the company for each of the four costing methods. (Round your average cost per unit to 2 decimal places and final answers to nearest whole dollar.)

Answer 1

3) Ending inventory = total units available for sale - sold units

= 970 - 655

= 315 units

a. FIFO

cost of goods sold = 125 units on Mar 1 at $60 = $7500

= 425 units on mar 5 at $65 = $27625

= 105 units on mar 18 at $70 = $7350

655 = $42475

Cost of ending inventory = 65 units on mar 18 at $70 = $4550

= 250 units on mar 25 at $72 = $18000

   315 = 22550

b. LIFO

cost of goods sold = 250 units on mar 25 at $72 = $18000

= 170 units on mar 18 at $70 = $11900

= 235 units on mar 5 at $65 = $15275

655 = $45175

  

Cost of ending inventory = 190 units on mar 5 at $65 = $12350

=125 units on Mar 1 at $60 = $7500

   315 =$19850

c. weighted average cost per unit

Weighted average cost per unit = total cost of goods available for sale / total units available for sale

= $65025 / 970 units

= $67.04 per unit

Cost of goods sold = 655 units * $67.04 = $43911

Cost of ending inventory = 315 units * $67.04 = $21118

d. specific identification

   Cost of goods sold = 80 units from beginning inventory at $60 = $4800

= 365 units from the March 5 purchase at $65 = $23725

= 65 units from the March 18 purchase at $70 = $4550

= 145 units from the March 25 purchase at $72 = $10440

655 = $43515

Cost of Ending inventory = 45 units from beginning inventory at $60 = $2700

= 60 units from the March 5 purchase at $65 = $3900

= 105 units from the March 18 purchase at $70 = $7350

= 105 units from the March 25 purchase at $72 = $7560

315 = $21510

4. Gross profit as per FIFO = sales - cost of goods sold

= $64325 - $45175

= 21850

Gross profit as per LIFO = sales - cost of goods sold

= $64325 -  $45175

= 19150

Gross profit as per weighted average = sales - cost of goods sold

= $64325 -  $43911

= $20414

Gross profit as per specific identification = sales - cost of goods sold

=$64325 - $43515

= $20810