Question

*Problem 8-6
Shamrock Company is a multi product firm. Presented below is information concerning one of its
products, the Hawkeye.

Date Transaction Quantity Price/Cost
7/l Beginning inventory 3,200 $18
2/4 Purchase 4,200 27
2/2O Sale 4,700 46
4/2 Purchase 5,200 35
ll/4 Sale 4,400 50

Calculate average-cost per unit.
Average-cost per unit

Compute cost of goods sold, assuming Shamrock uses:
Cost of goods sold
(a) Periodic system, FIFO cost flow $
(b) Perpetual system, FIFO cost flow $
(c) Periodic system, LIFO cost flow $
(d) Perpetual system, LIFO cost flow $
(e) Periodic system, weighted-average cost flow $
(f) Perpetual system, moving-average cost flow $

Answer 1

Solution :

Cost of goods available for sale = (3200 * $18) + (4200*$27) + (5200*$35) = $353,000

Total quantity avaiable for sale = 3200 + 4200 +5200 = 12600

Average cost per unit = Cost of goods available for sale / Nos of units available for sale

= $353,000 / 12600 = $28.02 per unit

Solution a:

Cost of goods available for sale = (3200 * $18) + (4200*$27) + (5200*$35) = $353,000

Quantity in ending inventory = 3200 + 4200 +5200 - 4700 - 4400 = 3500

In FIFO ending inventory will consist of purchase from 4/2

Hence value of ending inventory = 3500 * $35 = $122,500

Cost of goods sold = Cost of goods available for sale - Value of ending inventory

= $353,000 - $122,500 = $230,500

Solution b:

Computation of ending inventory COGS under FIFO
Date	Beginning Inventory			Purchase			Cost of Goods Sold			Ending Inventory
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
7/1	3200	$18.00	$57,600.00	0	$0.00	$0.00	0	$0.00	$0.00	3200	$18.00	$57,600.00
2/4	3200	$18.00	$57,600.00	4200	$27.00	$113,400.00	0	$0.00	$0.00	3200	$18.00	$57,600.00
										4200	$27.00	$113,400.00
2/20	3200	$18.00	$57,600.00	0	$0.00	$0.00	3200	$18.00	$57,600.00	2700	$27.00	$72,900.00
	4200	$27.00	$113,400.00				1500	$27.00	$40,500.00
4/2	2700	$27.00	$72,900.00	5200	$35.00	$182,000.00	0	$0.00	$0.00	2700	$27.00	$72,900.00
										5200	$35.00	$182,000.00
11/4	2700	$27.00	$72,900.00	0	$0.00	$0.00	2700	$27.00	$72,900.00	3500	$35.00	$122,500.00
	5200	$35.00	$182,000.00				1700	$35.00	$59,500.00
Total									$230,500.00			$122,500.00

Solution c:

Under LIFO ending inventory will consist of 3200 units from begining inventory and 300 units from 2/4 purchase

Cost of ending inventory = (3200*$18) + (300*$27) = $65,700

Cost of goods sold = $353,000 - $65,700 = $287,300

Solution d:

Computation of ending inventory COGS under LIFO
Date	Beginning Inventory			Purchase			Cost of Goods Sold			Ending Inventory
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
7/1	3200	$18.00	$57,600.00	0	$0.00	$0.00	0	$0.00	$0.00	3200	$18.00	$57,600.00
2/4	3200	$18.00	$57,600.00	4200	$27.00	$113,400.00	0	$0.00	$0.00	3200	$18.00	$57,600.00
										4200	$27.00	$113,400.00
2/20	3200	$18.00	$57,600.00	0	$0.00	$0.00	4200	$27.00	$113,400.00	2700	$18.00	$48,600.00
	4200	$27.00	$113,400.00				500	$18.00	$9,000.00
4/2	2700	$18.00	$48,600.00	5200	$35.00	$182,000.00	0	$0.00	$0.00	2700	$18.00	$48,600.00
										5200	$35.00	$182,000.00
11/4	2700	$18.00	$48,600.00	0	$0.00	$0.00	4400	$35.00	$154,000.00	2700	$18.00	$48,600.00
	5200	$35.00	$182,000.00							800	$35.00	$28,000.00
Total									$276,400.00			$76,600.00

Solution e:

Weighted average cost per unit = Cost of goods available for sale / Nos of units avaiable for sale

= $353,000 / 12600 = $28.02 per unit

Cost of ending inventory using Weighted average = 3500 * $28.02 = $98,056

Cost of goods sold =$353,000 - $98,056 = $254,944

Solution f:

Computation of ending inventory COGS under Weighted Average Cost
Date	Opening Stock			Receiving			Issue			Closing Stock
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
7/1	3200	$18.00	$57,600.00	0	$0.00	$0.00	0	$0.00	$0.00	3200	$18.00	$57,600.00
2/4	3200	$18.00	$57,600.00	4200	$27.00	$113,400.00	0	$0.00	$0	7400	$23.11	$171,000
2/20	7400	$23.11	$171,000	0	$0.00	$0	4700	$23.11	$108,608	2700	$23.11	$62,392
4/2	2700	$23.11	$62,392	5200	$35.00	$182,000	0	$0.00	$0	7900	$30.94	$244,392
11/4	7900	$30.94	$244,392	0	$0.00	$0	4400	$30.94	$136,117	3500	$30.94	$108,275
Total									$244,725			$108,275