Question

In: Accounting

Marigold Corp. had a beginning inventory of 110 units of Product RST at a cost of...

Marigold Corp. had a beginning inventory of 110 units of Product RST at a cost of $7 per unit. During the year, purchases were:

Feb. 20 660 units at $8

Aug. 12 430 units at $10

May 5 530 units at $9

Dec. 8 110 units at $11

Marigold uses a periodic inventory system. Sales totaled 1,560 units.

What are the ending inventory and cost of goods sold in FIFO LIFO AVERAGE-COST.

Solutions

Expert Solution

First let us compute the ending inventory balance unit

Ending inventory = Opening + Purchase - Sales

= (110) + (660 + 430 + 530 + 110) - (1560)

= 280 units

1) Now let us compute inventory amount and cost of goods sold under FIFO method

First in fist out means - all the inventory from the beginning gets consumed first and the ending balance basically comes from last purchased units. Last purchased batch are 110 units @ 11. So the balance of 170 units (280 - 110) comes from May 5th batch of 530 units purchased at 9 per unit.

Hence ending inventory cost = 110*11 + 170*9

= 1,210 + 1,530

Ending inventory of 280 units under FIFO method = $ 2,740

Cost of goods sold units = Opening + Purchase - ending

= 110*7 + (660*8 + 430*10 + 530*9 + 110*11) - 2,740

= 770 + 5280 + 4300 + 4770 + 1210 - 2740

CGS under FIFO = 3,310

2) Ending inventory and CGS under LIFO method

Under LIFO the opening units and early putrchases will remain in the closing balance as later purchases are consumed early. Hence the inventory of 280 units will comprise of 110 units @7 from opening balance and 170 units from Feb 20 purchase of units @ 8.

Hence ending inventory cost = 110*7 + 170*8

= 770 + 1,360

= 2,130

Ending inventory of 280 units under LIFO method = $ 2,130

Cost of goods sold units = Opening + Purchase - ending

= 110*7 + (660*8 + 430*10 + 530*9 + 110*11) - 2,130

= 6050 - 2130

CGS under LIFO = 3,920

3) Inventory and CGS under Average cost method

Need to compute weighted average cost per unit

110*7 = 770

660*8 = 5,280

430*10 = 4,300

530*9 = 4,770

110*11 = 1210

Total cost = 16,330

Total units = 1,840

Average cost = 8.875 per unit

Ending inventory = 280 units * 8.875

Ending inventory under average cost methods = $ 2,485

Cost of goods sold units = Opening + Purchase - ending

= 110*7 + (660*8 + 430*10 + 530*9 + 110*11) - 2,485

= 6050 - 2,485

Cost of goods sold under average inventory method = 3,565

ekkarill92 answered 1 year ago
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