Question

Periodic Inventory by Three Methods

The units of an item available for sale during the year were as follows:

Jan. 1	Inventory	6 units @ $50
Feb. 17	Purchase	14 units @ $52
Jul. 21	Purchase	13 units @ $53
Nov. 23	Purchase	10 units @ $54

There are 4 units of the item in the physical inventory at December 31. The periodic inventory system is used. Round average unit cost to one decimal and final answers to the nearest whole dollar, if required.

a. Determine the inventory cost by the first-in, first-out method.
$

b. Determine the inventory cost by the last-in, first-out method.
$

c. Determine the inventory cost by the weighted average cost method.
$

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 4 units consists of Nov. 23 purchases.

Ending inventory = 4 * $54 = $216

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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 4 units consists of Beginning inventory

Ending inventory = 4 * $50 = $200

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

= [(6*$50)+(14*$52)+(13*$53)+(10*$54)] / (6+14+13+10)

= $2,257 / 43

= $52.5

Ending inventory = 4 * $52.5 = $210

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a. $216

b. $200

c. $210