Question

1)

Aday's Fine Foods has the following inventory and purchasing records from the past month:

Date	Activity	Cases	Cost Per Case
1.1	Opening Inventory	40	$         12.00
1.6	Purchase	2	$         12.50
1.12	Purchase	60	$         14.00
1.22	Purchase	30	$         13.00
1.27	Purchase	15	$         11.50

Closing Inventory: 50 cases

Using the information above, solve the following:

Which inventory valuation method would give the highest gross profit?

Select one:

a. LIFO

b. FIFO

c. WAPP

d. LPP

2)

Aday's Bar has the following inventory and purchasing records from the past month:

Date	Activity	Cases	Cost Per Case
1.1	Opening Inventory	85	$           4.25
1.6	Purchase	250	$           6.75
1.12	Purchase	400	$           4.75
1.22	Purchase	320	$           5.25
1.27	Purchase	200	$           5.00
1.31	Purchase	400	$           4.75

Closing Inventory: 450 cases

Using the information above, solve the following:

What is the closing inventory value using the Latest Purchase Price method?

Select one:

a. $2,137.50

b. $758.95

c. $653.45

d. $456.76

3)

Aday's Bar has the following inventory and purchasing records from the past month:

Date	Activity	Cases	Cost Per Case
1.1	Opening Inventory	85	$           4.25
1.6	Purchase	250	$           6.75
1.12	Purchase	400	$           4.75
1.22	Purchase	320	$           5.25
1.27	Purchase	200	$           5.00
1.31	Purchase	400	$           4.75

Closing Inventory: 450 cases

Using the information above, solve the following:

What is the closing inventory value using the Weighted Average Purchase Price method?

Select one:

a. $2,319.00

b. $758.95

c. $653.45

d. $456.76

Answer 1

1. From the above it is observed that the purchase prices increased by the end of the month than the begining of the month.

In order to have highest profits the cost of goods sold but be less.

Given closing inventoty =50 sales made=opening +purchases-closing

Sales made = 40+107-50=97

So under FIFO method

Total cost of good = (40*12)+(2*12.5)+(55*14)=1275

So under LIFO method

Total cost of good =(15*11.5)+(30*13)+(52*14)=1290.5

So under Weighted average Purchase price(WAPP)  method

Total cost/Total quantity*no of unit sold

= 1907.5/147=12.97619*97=1258.69

		Cases	Cost	Total cost
1.1	Opening inventory	40	12	480
1.6	Purchase	2	12.5	25
1.12	Purchase	60	14	840
1.22	Purchase	30	13	390
1.27	Purchase	15	11.5	172.5
		147		1907.5

Under LPP

lastest purchase price method =closing stock value = 50*11.5=575

So cost of goods sold= 1907.5-575=1332.5

so the answer is C (WAPP) because of least COGS

2.

		Cases	Cost	Total cost
1.1	Opening inventory	85	4.25	361.25
1.6	Purchase	250	6.75	1687.5
1.12	Purchase	400	4.75	1900
1.22	Purchase	320	5.25	1680
1.27	Purchase	200	5	1000
1.31	Purchase	400	4.75	1900

Latest Purchase Price method=closing stock*latest price

=450*4.75=2137.5$ option (A)

3

		Cases	Cost	Total cost
1.1	Opening inventory	85	4.25	361.25
1.6	Purchase	250	6.75	1687.5
1.12	Purchase	400	4.75	1900
1.22	Purchase	320	5.25	1680
1.27	Purchase	200	5	1000
1.31	Purchase	400	4.75	1900
		1655		8528.75

Weighted Average Purchase Price method per case = Total cost of inventory/no of units=8528.75/1655=5.1533$

So for 450 cases= 450*5.1533$=2318.995 or 2319 $ ie option A