Question

Concord Company uses a periodic system reports the following for the month of June. Units Unit Cost Total Cost June 1 Inventory 200 $5 $ 1,000 12 Purchase 450 6 2,700 23 Purchase 320 7 2,240 30 Inventory 120

Compute the cost of the ending inventory and the cost of goods sold under FIFO and LIFO. FIFO LIFO Cost of the ending inventory $ $ Cost of goods sold $ $ LINK TO TEXT

Which costing method gives the higher ending inventory? LIFO methodAverage-cost methodFIFO method LINK TO TEXT

Which method results in the higher cost of goods sold? LIFO methodFIFO methodAverage-cost method

Answer 1

1)The cost of the ending inventory and the cost of goods sold under FIFO and LIFO is as follows:

a) FIFO Method :

Cost of the ending inventory = 120 units * $7

                                           = $840

Cost of goods sold = Begining Inventory + Purchases - ending inventory

                          = $1,000 + ($ 2,700 + $ 2,240 ) - $840

                              = $1,000 + $4,940 - $840

                              = $5,100

b) LIFO Method :

Cost of the ending inventory = 120 units * $5

                                           = $600

Cost of goods sold = Begining Inventory + Purchases - ending inventory

                          = $1,000 + ($ 2,700 + $ 2,240 ) - $600

                              = $1,000 + $4,940 - $600

                              = $5,340

c) Weighted Average Cost Method:

Cost Per Unit = ($1,000 + $ 2,700 + $ 2,240 ) / (200 units + 450 units + 320 units)

                      = $5,940 / 970 Units

                       = $6.12

Cost of the ending inventory = 120 units * $6.12

                                           = $735

Cost of goods sold = Begining Inventory + Purchases - ending inventory

                          = $1,000 + ($ 2,700 + $ 2,240 ) - $735

                              = $1,000 + $4,940 - $735

                              = $5,205

2)FIFO Method gives the higher ending inventory that is $840

3) LIFO Method gives the higher cost of goods sold that is $5,340