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Question (2) Units Unit Cost ($) Total Jan. 1 (Beg.)          100                  15    

Question (2)

Units

Unit Cost ($)

Total

Jan. 1 (Beg.)

         100

                 15

      1,500

Jan. 15 Purchase  

         100

                 20

      2,000

Jan. 20 Purchase  

         200

                 25

      5,000

Jan. 25 Purchase  

         150

                 30

      4,500

Total

         550

    13,000

Jan. 30 Sold

         220

Selling Price ($)

            50

Required:

  1. Assume ABC uses the Weighted – Average method calculate I-ending inventory, II-cost of goods sold andIII-gross profit.  
  1. Assume ABC uses LIFOmethod calculate I-ending inventory, II-cost of goods sold andIII-gross profit.  

Solutions

Expert Solution

Units

Unit Cost ($)

Total

Jan. 1 (Beg.)

         100

                 15

      1,500

Jan. 15 Purchase  

         100

                 20

      2,000

Jan. 20 Purchase  

         200

                 25

      5,000

Jan. 25 Purchase  

         150

                 30

      4,500

Total

         550

    13,000

Jan. 30 Sold

         220

Selling Price ($)

            50

Required:

A. Assume ABC uses the Weighted – Average method calculate I-ending inventory, II-cost of goods sold and III-gross profit.  

Total Units of goods available for sale

Jan. 1 (Beg.)

         100

                 15

      1,500

Jan. 15 Purchase  

         100

                 20

      2,000

Jan. 20 Purchase  

         200

                 25

      5,000

Jan. 25 Purchase  

         150

                 30

      4,500

Total

         550

    13,000

Weighted average cost of goods per units = 13000 / 550 = 23.636 per units

I . ending inventory, = Ending inventory units * Weighted average cost of goods per units

Ending inventory units = Total units available for sales - Sold units

Total units available for sales = 550 units

Sold units = 220

Ending inventory units = 550 - 220 = 330

ending inventory, = 330 * 23.636 = 78000

II-cost of goods sold = Total units sold * Weighted average cost of goods per units

Total units sold = 220 units

Weighted average cost of goods per units = 23.64 per units

-cost of goods sold = 220 * 23.636 = 5200

III-gross profit. = Sales - Cost of goods sold

Sales = sold units * selling price

sold units = 220 units

Selling price = 50 per units

Sale = 220 * 50 = 11000

Cost of goods sold = 5200

Gross profit = 11000 - 5200 = 5800

B. Assume ABC uses LIFO method calculate I-ending inventory, II-cost of goods sold and III-gross profit.

Total Units of goods available for sale

Jan. 1 (Beg.)

         100

                 15

      1,500

Jan. 15 Purchase  

         100

                 20

      2,000

Jan. 20 Purchase  

         200

                 25

      5,000

Jan. 25 Purchase  

         150

                 30

      4,500

Total

         550

    13,000

**Assign the cost of the newest goods to cost of goods sold and cost of oldest goods to inventory

Here I first calculate the cost of goods sold, because this way is easy to find remaining inventory

II-cost of goods sold = cost of the newest goods to cost of goods sold

Sold units total = 220

150 units are taken from jan 25th purchase with cost of 30 per units

Remaining ( 220 - 150 = 70 ) 70 units are taken from Jan 20th purchase with cost of 25 per units

Cost of good sold = 6250

Particulars

units

Cost per units

Total cost

jan 25th purchase

150

30

4500

Jan 20th purchase

70 ( 220 - 150 )

25

1750

Total cost of good sold

6250

I-ending inventory = Cost of oldest goods to ending inventory

Total ending inventory units = 330

Cost of ending inventory = 6750

Particulars

units

Cost per units

Total

jan 20th purchase

130 (200-70)

25

3250

jan 15th purchase

100

20

2000

Jan 1 beg.

100

15

1500

Total

6750

II-gross profit. = sales - cost of goods sold

Sales = 220 * 50 = 11000

cost of goods sold = 6250

gross profit. = 11000 - 6250 = 4750


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