Question

Bass products has been using weighted average method of inventory valuation. New management in the company has advised the accounting department to move to the FIFO method of inventory valuation. After facing some resistance from the department, the management has asked you to explain them the benefits of FIFO method, and also to provide with the mandatry reporting requirement due to the change in the method of inventory Since the accounting department is not well versed with this new system of recording the inventory transactions, the management has asked you to prepare the Inventory accounts for them.

Following are the inventory related activities that were performed during the period

01-Jan-20 Purchased 1140 units @ 14.6 per unit

03-Jan-20 Purchased 920 units @15.2 per unit 04-Jan-20 Issued 780 units to the manufacturing department

04-Jan-20 Manufacturing department worked on the 780 units and incurred $3,130 as direct cost and $1,870 as indirect cost towards completing these units.

07-Jan-20 Purchased 640 units @14 per unit

11-Jan-20 Issued 810 units to the manufacturing department, which were completed and $6,360 was spent on its manufacturing

12-Jan-20 Sold 215 units with the selling price of $48 per unit 18-Jan-20 Purchased 710 units @15.6 per unit

21-Jan-20 Issued 590 units to the manufacturing department

The manufacturing department could complete only 320 units

Following are the costs that were incurred on 590 units

Cleaning $ 515

Direct labor $ 710

Utilities $ 165

Chemicals $ 90

Allocation on indirect cost $ 1,820

Out of these cost, 75% belongs to the completed goods

27-Jan-20 Sold 305 units @48 per unit

Compute the closing value of inventory, and cost of goods sold

Answer 1