Question

6. Periodic Inventory System and Inventory Costing Methods

In chronological order, the inventory, purchases, and sales of a single product for a recent month are as follows:

		Units	Amount per Unit
June 1	Beginning inventory	150	$30
4	Purchase	400	33
12	Purchase	800	36
16	Sale	1,300	60
24	Purchase	300	39

Using the periodic inventory system, compute the cost of ending inventory, cost of goods sold, and gross margin. Use the average-cost, FIFO, and LIFO inventory costing methods. Round unit costs to the nearest cent and round the final answers to the nearest dollar.

	Average-cost method	FIFO method	LIFO method
Ending inventory:	$	$	$
Cost of goods sold:	$	$	$
Gross margin:	$	$	$

Explain the differences in gross margin produced by the three methods.

Answer 1

		Units	Per unit cost	Amount
	Beginning inventory	150	30	4500
	4 june purchase	400	33	13200
	12 june purchase	800	36	28800
	24 june purchase	300	39	11700
	Total cost of goods available for sale	1650		58200
1	Average cost per unit	35.27
		(58200/1650)
	Ending inventory	350
	Average cost per unit	35.27
	Total inventory cost	12345
	Cost of goods available for sale	58200
Less	Ending inventory	12345
	Cost of goods sold	45855
2	FIFO
	Ending inventory	Units	Per unit cost	Amount
	june 12 purchase	50	36	1800
	june 24 purchase	300	39	11700
	Total	350		13500
	Cost of goods available for sale	58200
Less	Ending inventory	13500
	Cost of goods sold	44700
3	LIFO
	Ending inventory	Units	Per unit cost	Amount
	June 1 inventory	150	30	4500
	june 4 purchase	200	33	6600
	Total	350		11100
	Cost of goods available for sale	58200
Less	Ending inventory	11100
	Cost of goods sold	47100
		Average	FIFO	LIFO
	Ending inventory	12345	13500	11100
	Cost of goods sold	45855	44700	47100
		Average	FIFO	LIFO
	Sales	78000	78000	78000
	Cost of goods sold	45855	44700	47100
	Gross margin	32145	33300	30900