Question

SAP Co. uses a periodic inventory system. It records show the following for the month of February:

Date Units UnitPrice Total Cost

2/1 40 $20.00 $800

2/15 Purchases 130 22.00 2,860

2/24 Purchases 110 23.50 2,585

Totals   280 $6,245

2/20 Sales 100 47.00

2/27 Sales 130 47.00

Given the information above, please calculate COGS,Ending Inventory, and Gross Profit under each of the following methods. (Please explain)

1) FIFO:

2) LIFO:

3) Average Cost:

Answer 1

1) FIFO METHOD (COGS, ENDING INVENTORY, GROSS PROFIT) periodic inventory

Cost of goods sold (230units)

=

2/1	(40×$20 =$800
2/15	130×$22 = $2860
2/24	60×$23.5 =$1410
Total cost of goods sold under FIFO	$5070

Ending inventory

2/24	50×$23.5 = $1175

Gross profit

Sales (100×$47)+(130×$47)	$10810
(-) cost of goods sold	($5070)
GROSS profit	$5740

2) LIFO METHOD PERIODIC INVENTORY

COST OF GOODS SOLD

2/24	(110×$23.50 = $2585
2/15	120×$22 = $2640
Cost of goods sold	$5225

Ending inventory

2/15	10×$22 =$220
2/1	40×$20 = $800
Ending inventory	$1020

Gross profit

Sales (100×$47)+(103×$47)	$10810
(-) cost of goods sold	($5225)
Gross profit	$5585

3) average cost method periodic inventory

cost of goods sold

Average cost per unit = total cost of goods available/total units available

= $6245/280 = $22.30

Cost of goods sold = 230×$22.30 =$5129

Ending inventory = 50×$22.30 = $1115

Gross profit = sales - cost of goods sold

= (100×$47)+(130×$47) - $5129

= $10810 - $5129 = $5681

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