Question

Cortez Company sells chairs that are used at computer stations. Its beginning inventory of chairs was 50 units at $75 per unit. During the year, Cortez made two batch purchases of this chair. The first was a 218-unit purchase at $85 per unit; the second was a 236-unit purchase at $90 per unit. During the period, it sold 340 chairs.

Determine the amount of products costs that would be allocated to cost of goods sold and ending inventory, assuming that Cortez uses A.FIFO

B.LIFO

C.Weighted average

Answer 1

Part A	FIFO
	Cost of goods sold
		FIFO	Units	Unit cost	Cost of goods sold
		From beginning inventory	50	75	3,750
		From first purchase	218	85	18,530
		From second purchase	72	90	6,480
		Total	340		28,760
	Ending inventory
		From second purchase	164	90	14,760
	Ending inventory units = (50+218+236-340) = 164 units
Part B	LIFO
	Cost of goods sold
		FIFO	Units	Unit cost	Cost of goods sold
		From second purchase	236	90	21,240
		From first purchase	104	85	8,840
		Total	340		30,080
	Ending inventory
		From first purchase	114	85	9,690
		From beginning inventory	50	75	3,750
			164		13,440
Part C	Weighted average
			Units	Average cost	Total
	Cost of goods sold		340	86.35	29,359
	Ending inventory		164	86.35	14,161
	Average cost
	50	75	3,750
	218	85	18,530
	236	90	21,240
	504		43,520
	Average cost = (43,520/ 504) = 86.35