Question

Problem 6-2AA Periodic: Alternative cost flows LO P3

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Warnerwoods Company uses a periodic inventory system. It entered into the following purchases and sales transactions for March.  

Date

Activities

Units Acquired at Cost

Units Sold at Retail

Mar.

1

Beginning inventory

190

units

@ $80 per unit

Mar.

5

Purchase

490

units

@ $85 per unit

Mar.

9

Sales

510

units

@ $115 per unit

Mar.

18

Purchase

300

units

@ $90 per unit

Mar.

25

Purchase

380

units

@ $92 per unit

Mar.

29

Sales

340

units

@ $125 per unit

Totals

1,360

units

850

units

For specific identification, the March 9 sale consisted of 50 units from beginning inventory and 460 units from the March 5 purchase; the March 29 sale consisted of 130 units from the March 18 purchase and 210 units from the March 25 purchase.

Required.

1. Compute cost of goods available for sale and the number of units available for sale.

2. Compute the number of units in ending inventory.

3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. (Round your average cost per unit to 2 decimal places.)

4. Compute gross profit earned by the company for each of the four costing methods. (Round your average cost per unit to 2 decimal places and final answers to nearest whole dollar.)

Answer 1

Date	Tran.	opening	Cost/unit	Purchase	Cost/unit	Value	Total	Sales	value/unit	Value	Balance
Mar-1	Opening	190	80	0	0	15200	190	0	0	0	190
Mar-5	Purchase	190		490	85	41650	680	0	0	0	680
Mar-9	Sales	680					680	510	115	58650	170
Mar-18	Purchase	170		300	90	27000	470	0	0	0	470
Mar-25	Purchase	470		380	92	34960	850	0	0	0	850
Mar-29	Sales	850		0			850	340	125	42500	510
				1170		118810		850		101150

1. Cost Goods available for sales= Opening stock + Purchases

=15200+103610=118810

Number units available for sale= Opening+Purchases

= 1170+190=1360

2. Closing inventory = 510 ( See the table)

3. Cost of the inventory

a) FIFO

   380 x 92    =34960

(510-380)x 90=11700

=46660

b) LIFO

190 x 80 = 15200

   (510-190) x 85=27200

   =42400

c) Weighted average method

Average cost of Goods available for sale = 118810/1360=87.36

Inventory value = 87.36x510=44553.75

d) Specific identification

Unit	Sold	Balance	Cost/Unit	Value
190	50	140	80	11200
490	460	30	85	2550
300	130	170	90	15300
380	210	170	92	15640
Total		510		44690

4.GROSS PROFIT

	FIFO	LIFO	Weighted Average	Specific Identification
Sales	101150	101150	101150	101150
Less: Cost of goods sold
Cost of goods availabl for sale	118810	118810	118810	118810
Less: Closing stck	46660	42400	44553.75	44690
	72150	76410	74256.25	74120
Gross Profit	29000	24740	26893.75	27030