Question

During April, the following changes in the single inventory product took place:

          April   1     Balance                        1,400 units @ $24

                      8     Purchased                      900 units @ $36

                    12     Purchased                      700 units @ $30

                    24     Purchased                      400 units @ $50

                    10     Sold                              1,500 units @ $40

                    26     Sold                              1,700 units @ $44

Calculate the COGS after each sales transaction and the ending inventory after each transaction under the following methods.

(a)   FIFO.

(b)   Average Cost. (round numbers to the nearest 10)

Answer 1

Answer:

a) FIFO :

Date	Particulars	COGS	Ending Inventory
April 1	Balance	1400 units@24	1400*24 = 33,600
April 8	Purchased	900 units@36	1400*24 = 33,600 900*36 = 32,400
April 10	Sold	1500 units@40 1500*40 = 60,000	800*36 = 28,800
April 12	Purchased	700 units @ $30	800*36 = 28,800 700*30 = 21,000
April 24	Purchased	400 units @ $50	800*36 = 28,800 700*30 = 21,000 400*50 = 20,000
April 26	Sold	1,700 units @ $44 1700*44 = 74,800	200*50 = 10,000

(b)   Average Cost :

Date	Particulars	COGS	Ending Inventory
April 1	Balance	1400 units@24	1400*24 = 33,600
April 8	Purchased	900 units@36	(1400+900)*(24+36)/2 = 69,000
April 10	Sold	1500 units@40 1500*40 = 60,000	800*30 = 24,000
April 12	Purchased	700 units @ $30	(800+700)*(30+30)/2= 45,000
April 24	Purchased	400 units @ $50	(800+700+400)*(30+30+50)/3 = 1900*36.67 = 69,670
April 26	Sold	1,700 units @ $44 1700*44 = 74,800	200*36.67 = 7,335