Question

Johnson Company reports the following for the month of June.

Date			Explanation		Units			Unit Cost			Total Cost
June	1		Inventory		225			$5			$1,125
	12		Purchase		525			6			3,150
	23		Purchase		750			7			5,250
	30		Inventory		280

Compute the cost of the ending inventory and the cost of goods sold under FIFO, LIFO, and average cost. (Round average cost per unit to 2 decimal places, e.g. 5.25 and final answers to 0 decimal places, e.g. 2,520.)

		FIFO		LIFO		AVERAGE COST
Ending inventory
Cost of goods sold		$		$		$

Which costing method gives the highest ending inventory? The highest cost of goods sold?

Average costLIFOFIFO	costing method gives the highest ending inventory.
Average costFIFOLIFO	method will produce the highest cost of goods sold.

Answer 1

Solution

	FIFO	LIFO	Weighted Average
Ending Inventory	$                 1,960	$                   1,455	$             1,778
Cost of Goods Sold	$                 7,565	$                   8,070	$             7,747

.

FIFO	costing method gives the highest ending inventory.
LIFO	method will produce the highest cost of goods sold.

Working

	Units	Cost per unit	value
Beginning Balance	225	$                     5.00	$ 1,125
Purchases
	525	$                     6.00	$ 3,150
	750	$                     7.00	$ 5,250
Cost of goods available for sale	1500		$ 9,525

.

Average Cost of Inventory
Units	(A)	1500
Total Cost	(B)	$ 9,525
Average Cost	(C=B/A)	$ 6.35

.

FIFO
Total Units Available for sale		1500
Units Sold		1220
Closing Stock in Units		280
Valuation
Ending Inventory	280	@	$               7.00	$ 1,960
Value Of Ending Inventory				$ 1,960
Cost of Goods sold	9525 minus 1960			$ 7,565
LIFO
Total Units Available for sale		1500
Units Sold		1220
Closing Stock in Units		280
Valuation
Ending Inventory	225	@	$               5.00	$ 1,125
	55	@	$               6.00	$ 330
Value Of Ending Inventory				$              1,455
Cost of Goods sold	9525 minus 1455			$              8,070
Weighted Average method
Total Units Available for sale		1500
Units Sold		1220
Closing Stock in Units		280
Valuation
Ending Inventory	280	@	$               6.35	$              1,778
Value Of Ending Inventory				$              1,778
Cost of Goods sold	(Total Purchase and opening stock Minus Closing Stock)			$              7,747