Question

P8-6.  

(Compute FIFO, LIFO, Average-Cost—Periodic and Perpetual) – Use your notes to follow the process through

(LO 3) Ehlo Company is a multiproduct firm. Presented below is information concerning one of its products, the Hawkeye.

Date	Transaction	Quantity	Price/Cost
1/1	Beginning inventory	1,000	$12
2/4	Purchase	2,000	18
2/20	Sale	2,500	30
4/2	Purchase	3,000	23
11/4	Sale	2,200	33

Instructions

Compute cost of goods sold, assuming Ehlo uses:

(a) Periodic system, FIFO cost flow.

(b) Perpetual system, FIFO cost flow.

(c) Periodic system, LIFO cost flow.

(d) Perpetual system, LIFO cost flow.

(e) Periodic system, weighted-average cost flow.

(f)  Perpetual system, moving-average cost flow.

Answer 1

Periodic system	Unit (A)	Unit Cost (B)	Total Cost (A*B)
Beginning inventory, JAN 1	1000.00	12.00	12000.00
4-Feb	2000.00	18.00	36000.00
2-Apr	3000.00	23.00	69000.00
Total	6000.00		117000.00
average cost per unit	= Total cost / total units
	= 117000/6000	= 19.50
Sales units = 2500+2200=4700
cost of goods sold = units sold * average csot per unit
= 4700*19.50=	= 91650.00
FIFO= EARLIER PURCHASE SOLD FIRST
Cost of goods sold	Units * unit cost
beginning units = 6	1000*12=12000
4-Feb	2000*18=36000
2-Apr	1700*23=39100
Total	=12000+36000+39100=87100.00
LIFO = LATEST PURCHASE SOLD FIRST
Cost of goods sold	Units * unit cost
2-Apr	3000*23=69000
4-Feb	1700*18=30600
Total	= 69000+30600 = 99600.00
Perpetual system
LIFO SAME AS ABOVE
Cost of goods sold	Units * unit cost
beginning units	1000*12=12000
4-Feb	2000*18=36000
2-Apr	1700*23=39100
Total	=12000+36000+39100=87100.00
LIFO:
Cost of goods sold	Units * unit cost
beginning units	500*12=6000
4-Feb	2000*18=36000
2-Apr	2200*23 =50600
TOTAL	= 6000+36000+50600=92600.00
MOVING AVERAGE COST FLOW
	Unit (A)	Unit Cost (B)	Total Cost (A*B)
Beginning inventory, JAN 1	1000.00	12.00	12000.00
4-Feb	2000.00	18.00	36000.00
TOTAL	3000.00		48000.00
	COST PER UNIT = 48000/3000 = 16.00
	COST OF GOODS FOR SALE OF UNITS 2500	2500*16 =40000.00	BALANCE = 500*16 = 8000.00
2-Apr	3000.00	23.00	69000.00
BALANCE	500.00	16.00	8000.00
TOTAL	3500.00		77000.00
	COST PER UNIT = 77000/3500 = 22.00
	COST OF GOODS FOR SALE OF UNITS 2200	2200*22=48400.00
	TOTAL COST OF GOODS SOLD = 40000+48400	= 88400.00