Question

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Oriole Company markets CDs of numerous performing artists. At the beginning of March, Oriole had in beginning inventory 2,600 CDs with a unit cost of $8. During March, Oriole made the following purchases of CDs.

March 5		2,100		@		$9		March 21		5,500		@		$11
March 13		3,700		@		$10		March 26		2,100		@		$12

During March 12,000 units were sold. Oriole uses a periodic inventory system.

Determine the cost of goods available for sale.

The cost of goods available for sale $________ Calculate Average Cost. (Round answer to 3 decimal places, e.g. 5.125.) Average Cost $________

Determine (1) the ending inventory and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). (Round answers to 0 decimal places, e.g. 125.)

		FIFO		LIFO		AVERAGE-COST
The Ending Inventory		______ (Enter $ Amount)		______ (Enter $ Amount)		______ (Enter $ Amount)
The Cost Of Good Sold		______ (Enter $ Amount)		______ (Enter $ Amount)		______ (Enter $ Amount)

Answer 1

Introduction:-

FIFO = First in First Out . It implies that first purchase sold out first

LIFO = Last in First Out. It Implies that Last purchase will sold out first .

In the average cost method we are computing the average cost per unit to determine the ending inventory and cost of goods sold.

Solution:-

Computation of cost of goods avilable for sale

Begining inventory = (2,600 Cd's * $8 Per Cd) = $20,800

Purchase march 5 = (2,100 cd's * $9 Per cd) = $18,900

Purchase March 13 = (3,700 cd's * $10 Per cd) = $37,000

Purchase March 21 = (5,500 cd's * $11 Per cd) = $60,500

Purchase March 26 = (2,100 cd's * $12 Per cd) = $25,200

Total cost of goods sold avialable for sale = (20,800+18,900+37,00+60,500+25,200) = $162,400

Computation of Average Cost:-

Total Cost of goods available for sale = $162,400

Total units avialable for sale = (2,600+2,100+3,700+5,500+2,100) = 16,000 Units

Average Cost Per Cd

= (Total Cost of goods available for sale / Total units avialable for sale)

= ($162,400 / 16,000 Units)

= $10.15 Per Unit

Computation of cost of goods Sold and Ending Inventory under FIFO method using periodic inventory system :-

Cost OF Goods Sold

Here Sales Unit = 12,000 Units

From Begining Inventory = (2,600 Cd's * $8 Per Cd) = $20,800   

From Purchase march 5 = (2,100 cd's * $9 Per cd) = $18,900

From Purchase March 13 = (3,700 cd's* $10Per cd) = $37,000

From Purchase March 21 = (12,000-2,600-2,100-3,700) = 3,600 cd * $11 = $39,600

Total cost of goods sold = (20,800+18,900+37,000+39,600) = $116,300

Ending Inventory

From Purchase March 5 to March 13 Cd's are sold out. That will not come for valuing the ending inventory

From Purchase March 21 = (5,500 - 3,600) = 1,900 Cd' s * $11 per cd = $19,000

From Purchase March 26 = (2,100 cd's * $12 Per cd) = $25,200

Total Cost Of Ending Inventory = (19,000 + 25,200) = $44,200

Computation of cost of goods Sold and Ending Inventory under LIFO method using periodic inventory system :-

Cost OF Goods Sold

Here Sales Unit = 12,000 Units

From Purchase March 26 = (2,100 cd's * $12 Per cd) = $25,200

From Purchase March 21 = (5,500 cd's * $11 Per cd) = $60,500

From Purchase March 13 = (3,700 cd's * $10 Per cd) = $37,000

From Purchase march 5 = (12,000 - 2,100 - 5,500 - 3,700) = 700 Cd's * $9 Per cd =$6,300

Total cost of Goods sold = (25,200+60,500+37,000+6,300) = $129,000

Ending Inventory

From Purchase March 26 to March 13 Cd's are sold out. That will not come for valuing the ending inventory

From Purchase march 5 = (2,100 - 700) = 1,400 Cd's * $9 Per cd = 12,600

From Begining inventory = (2,600 Cd's * $8 Per Cd) = $20,800

Total Cost Of Ending Inventory = (12,600 + 20,800) = $33,400

Computation of cost of goods Sold and Ending Inventory under Average method using periodic inventory system :-

Cost OF Goods Sold

= (Number Of Unit Sold * Average Cost Per CD)

= (12,000 CD * $10.15 Per CD)

= $121,800

Ending Inventory

Ending Inventory in units

= (Total units avialbale for sale - Number Of Units Sold)

= (16,000 - 12,000)

= 4,000 CD

Ending Inventory in $

= (Ending Inventory in Units * Average Cost Per CD)

= (4,000 CD * $10.15 Per CD)

= $40,600

Answer:-

	FIFO ($)	LIFO ($)	Average Cost ($)
The Ending Inventory	44,200	33,400	40,600
The Cost of Goods Sold	116,300	129,000	121,800