Question

					('$)	('$)
					Unit.	Total	Balance
Date	Explanation			Units.	Cost	Cost	in Units
Jun-01	Beginning inventory.			50	1.0	50	50
Jun-06	Purchase			50	1.2	60	100
Jun-10	Sales			60			40
Jun-13	Purchase			150	1.4	210	190
Jun-20	Purchase			100	1.6	160	290
Jun-25	Purchase			150	1.8	270	440
Jun-30	Sales			200			240

FIFO Periodic System

COGS:

Ending Inventory:

Average Cost Periodic System

COGS:

Ending Inventory:

FIFO Previous System

COGS:

Ending Inventory:

Average Cost Previous System

COGS:

Ending Inventory:

Show Solutions

Answer 1

fifo periodic system :- if fifo method is used the units remaining in inventory represents most recent cost incurred to purchase the inventory cost of 240 units of ending inventory as follows:

(150×$1.8)+(90×$1.6)= 270+144

Ending inventory = $414

Cost of goods sold = beginning inventory +purchases —ending inventory

Cost of goods sold =$50+($60+$210+$160+$270) - $414

=$336

Average cost periodic method : under this method calculation of cost of goods sold & ending inventory is based on weighted average unit cost.

Weighted average unit cost =total cost of inventory /total units in inventory

=750/500 =$1.50

Ending inventory = 240×$1.50 =$360

Cost of goods sold =260×$1.50 =$390

We assume that fifo previous system & average cost previous methods calculation is as same as fifo periodic system & average cost periodic system. Previous systems are used to calculate the cost of inventory on year basis but here we had given only periodic information of a month. Hence we assume calculations of previous system is same as periodic system.