Question

Comparison of Inventory Costing Methods—Periodic System Bitten Company’s inventory records show 600 units on hand on October 1 with a unit cost of $5 each. The following transactions occurred during the month of October: Date Unit Purchases Unit Sales October 4 500 @ $10.00 October 8 800 @ $5.40 October 9 700 @ $10.00 October 18 700 @ $5.76 October 20 800 @ $11.00 October 29 800 @ $5.90 All expenses other than cost of goods sold amount to $3,000 for the month. The company uses an estimated tax rate of 30% to accrue monthly income taxes. Required: 1. Prepare a chart comparing cost of goods sold and ending inventory using the periodic system and the following costing methods. In your calculations round weighted average unit cost to three decimal places and round all other calculations and your final answers to the nearest dollar. Bitten Company Comparison for Cost of Goods Sold and Ending Inventory Using the Periodic System For Weighted Average, FIFO and LIFO Cost Methods Inventory System Cost of Goods Sold Ending Inventory Total Weighted average $ $ $ 16,072 FIFO 10,776 5,296 16,072 LIFO 16,072 Feedback

Answer 1

Date	Unit	Units selling price	Total sales
Oct 4	500	10	5000
Oct 9	700	10	7000
Oct 20	800	11	8800
Sales revenue			20800
Unit available foe sale	2900
Less: unit sold (500+700+800)	2000
Ending inventory	900

FIFO method
Date	Goods available for sale			Cost of goods sold			Ending inventory
	Unit	Unit cost	Value	Unit	Unit cost	Value	Unit	Unit cost	Value
Beg.	600	5.00	3000	600	5.00	3000
Oct 8	800	5.40	4320	800	5.40	4320
Oct 18	700	5.76	4032	600	5.76	3456	100	5.76	576
Oct 29	800	5.90	4720				800	5.90	4720
Total	2900		16072	2000		10776	900		5296
LIFO method
Date	Goods available for sale			Cost of goods sold			Ending inventory
	Unit	Unit cost	Value	Unit	Unit cost	Value	Unit	Unit cost	Value
Beg.	600	5.00	3000				600	5.00	3000
Oct 8	800	5.40	4320	500	5.40	2700	300	5.40	1620
Oct 18	700	5.76	4032	700	5.76	4032
Oct 29	800	5.90	4720	800	5.90	4720
Total	2900		16072	2000		11452	900		4620

Weighted average
Cost of goods available for sale			16072
Divided by: units available for sale			2900
Average cost per unit			5.542
Cost of goods sold	2000	5.542	11084
Ending inventory	900	5.542	4988

Summary of answer
	FIFO	LIFO	Weighted average
Cost of Goods sold	10776	11452	11084
Ending inventory	5296	4620	4988

Income statement
	FIFO	LIFO	Weighted average
Sales revenue	20800	20800	20800
Less: cost of goods sold	10776	11452	11084
Gross Profit	10024	9348	9716
Less: operating expense	3000	3000	3000
Income before tax	7024	6348	6716
Less: Tax expense @ 30%	2107	1904	2015
Net income	4917	4444	4701