Question

A- 10.5 Use the following information relating to Shana Company to calculate the inventory turnover ratio and the number of days’ sales in inventory ratio.

year	sales	cost of sales	average inventory
2021	22000	16500	2400
2022	28000	21000	3000
2023	33000	24750	3500
2024	35000	26250	4000

b.PA3. 10.2 Trini Company had the following transactions for the month.

	N0. of Unit	cost per unit	total
beginning inventory	1050	22$	23100
purchased May 31	1020	23	23460
purchased Jul15	1300	26	33800
purchased Nov1	1200	27	32400
Total (goods available for sale)	4570		112760
Ending Inventory	900	?

Calculate the cost of goods sold dollar value for the period for each of the following cost allocation methods, using periodic inventory updating. Provide your calculations.

A. first-in, first-out (FIFO)

B. last-in, first-out (LIFO)

C. weighted average (AVG)

Answer 1

Requirement A:

Inventory Turnover = Cost of Sales / Average Inventories Number of days' sales in inventory ratio = 365 days * Average Inventories / Cost of sales

Ratios	2021	2022	2023	2024
Inventory Turnover	$16,500 / $2,400 = 6.875 times	$21,000 / $3,000. = 7.000 times	$24,750 / $3,500 = 7.071 times	$26,250 / $4,000 = 6.563 times
Number of days' sales in inventory	365 days * $2,400 / $16,500 = 53.09 days	365 days * $3,000 / $21,000 = 52.14 days	365 days * $3,500 / $24,750 = 51.62 days	365 days * $4,000 / $26,250 = 55.62 days

Requirement B:

Total goods available for sale = 4,570 units

Ending Inventory (Units) = 900 Units

Units Sold = 4,570 Units - 900 Units = 3,670 Units

A. FIFO

Cost of goods sold = (1,050 Units * $22) + (1,020 Units * $23) + (1,300 Units * $26) + (3,670 - 1,050 - 1,020 - 1,300) Units * $27

= $23,100 + $23,460 + $33,800 + (300 Units * $27)

= $88,460

Ending Inventory = 900 Units * $27

= $24,300

B. LIFO

Cost of goods sold = (1,200 Units * $27) + (1,300 Units * $26) + (1,020 Units * $23) + (3,670 - 1,200 - 1,300 - 1,020) Units * $22

= $32,400 + $33,800 + $23,460 + (150 Units * $22)

= $92,960

Ending Inventory = 900 Units * $22

= $19,800

C. AVG

Average cost per unit = $112,760 / 4,570 Units = $24.67 per unit

Cost of goods sold = 3,670 Units * $24.67 per unit = $90,538.90

Ending Inventory = 900 Units * $24.67 per unit = $22,203

All the best...