Question

Ayayai Company sells many products. Gizmo is one of its popular items. Below is an analysis of the inventory purchases and sales of Gizmo for the month of March. Ayayai Company uses the perpetual inventory system.

				Purchases						Sales
				Units			Unit Cost			Units			Selling Price/Unit
3/1		Beginning inventory		60			$55
3/3		Purchase		36			$60
3/4		Sales								36				$120
3/10		Purchase		120			$65
3/16		Sales								54				$130
3/19		Sales								42				$130
3/25		Sales								30				$130
3/30		Purchase		24			$75

Using the FIFO assumption, calculate the amount charged to cost of goods sold for March.

Cost of goods sold

$enter Cost of goods sold in dollars

Using the moving average cost method, calculate the amount assigned to the inventory on hand on March 31. (Round average cost per unit to 3 decimal places, e.g. 5.254 and final answer to 2 decimal places, e.g. 2,520.56.)

Amount assigned to the inventory

enter Amount assigned to the inventory in dollars

Using the LIFO assumption, calculate the amount assigned to the inventory on hand on March 31.

Amount assigned to the inventory

$enter Amount assigned to the inventory in dollars

Using the LIFO assumption, calculate the amount charged to cost of goods sold for March.

Cost of goods sold

$enter Cost of goods sold in dollars

Answer 1

1) FIFO Assumption:- Under FIFO method, goods purchase first are sold first.

Calculation of cost of goods sold under FIFO (Amounts in $)

	Purchases			Cost of goods sold			Inventory Balance
Date	Qty (a)	Unit cost (b)	Total Cost (a*b)	Qty (c)	Unit Cost (d)	Total Cost (c*d)	Qty (e)	Unit Cost (f)	Total Cost (e*f)
3/1							60	$55	3,300
3/3	36	$60	2,160				60	$55	3,300
							36	$60	2,160
3/4				36	$55	1,980	24	$55	1,320
							36	$60	2,160
3/10	120	$65	7,800				24	$55	1,320
							36	$60	2,160
							120	$65	7,800
3/16				24	$55	1,320	0	$55	0
				30	$60	1,800	6	$60	360
							120	$65	7,800
3/19				6	$60	360	0	$55	0
				36	$65	2,340	0	$60	0
							84	$65	5,460
3/25				30	$65	1,950	0	$55	0
							0	$60	0
							54	$65	3,510
3/30	24	$75	1,800				54	$65	3,510
							24	$75	1,800
Total			11,760			9,750			5,310

Therefore the cost of goods sold for March under FIFO is $9,750.

2) Moving Average Cost Method:- Under this method, average cost is calculated after every purchase. Average cost is equal to total cost of goods available divided by total units available.

Calculation of Ending Inventory under Moving Average (Amounts in $)

	Purchases			Cost of goods sold			Inventory Balance
Date	Qty (a)	Unit cost (b)	Total Cost (a*b)	Qty (c)	Unit Cost (d)	Total Cost (c*d)	Qty (e)	Unit Cost (f)	Total Cost (e*f)
3/1							60	$55	3,300
3/3	36	$60	2,160				60	$55	3,300
							36	$60	2,160
Average							96	$56.875	5,460
3/4				36	$56.875	2,047.50	60	$56.875	3,412.50
3/10	120	$65	7,800				60	$56.875	3,412.50
							120	$65	7,800
Average							180	$62.292	11,212.50
3/16				54	$62.292	3,363.77	126	$62.292	7,848.79
3/19				42	$62.292	2,616.26	84	$62.292	5,232.53
3/25				30	$62.292	1,868.76	54	$62.292	3,363.77
3/30	24	$75	1,800				54	$62.292	3,363.77
							24	$75	1,800
Average							78	$66.202	5,163.77
Total			11,760			9,896.29			5,163.77

Therefore the cost of goods sold for March under moving average is $9,896.29 and ending inventory in dollars is $5,163.77.

3) LIFO Assumption:- Under LIFO method, goods purchase last are sold first.

Calculation of cost of goods sold and ending inventory   (Amounts in $)

	Purchases			Cost of goods sold			Inventory Balance
Date	Qty (a)	Unit cost (b)	Total Cost (a*b)	Qty (c)	Unit Cost (d)	Total Cost (c*d)	Qty (e)	Unit Cost (f)	Total Cost (e*f)
3/1							60	$55	3,300
3/3	36	$60	2,160				60	$55	3,300
							36	$60	2,160
3/4				36	$60	2,160	60	$55	3,300
							0	$60	0
3/10	120	$65	7,800				60	$55	3,300
							0	$60	0
							120	$65	7,800
3/16				54	$65	3,510	60	$55	3,300
							0	$60	0
							66	$65	4,290
3/19				42	$65	2,730	60	$55	3,300
							0	$60	0
							24	$65	1,560
3/25				24	$65	1,560	54	$55	2,970
				6	$55	330	0	$60	0
							0	$65	0
3/30	24	$75	1,800				54	$55	2,970
							24	$75	1,800
Total			11,760			10,290			4,770

Therefore the cost of goods sold for March under LIFO is $10,290 and cost of ending inventory is $4,770.