Question

eriodic Inventory by Three Methods

The units of an item available for sale during the year were as follows:

Jan. 1	Inventory	13 units at $41
Feb. 17	Purchase	5 units at $43
Jul. 21	Purchase	17 units at $46
Nov. 23	Purchase	20 units at $47

1. There are 5 units of the item in the physical inventory at December 31. The periodic inventory system is used. Round average unit cost to one decimal and final answers to the nearest whole dollar, if required.

   a. Determine the inventory cost by the first-in, first-out method.
   $

   b. Determine the inventory cost by the last-in, first-out method.
   $

   c. Determine the inventory cost by the weighted average cost method.
   $

Answer 1

a.
First-in, first-out (FIFO) : In this method those goods are sold first which are purchased first and the ending inventory is from the latest purchases.
Inventory cost = 5 units * $47 =	$                 235

b.
Last-in, first-out (LIFO) : In this method those goods are sold first which are purchased last ( i.e. recently ) and the endign inventory is from beginning inventory and ealier purchases.
Inventory cost = 5 units * $41 =	$                 205

c.
weighted average cost method
Date	Particulars	units	Unit cost	Total cost
Jan. 1	inventory	13	41	533
Feb. 17	Purchase	5	43	215
Jul. 21	Purchase	17	46	782
Nov. 23	Purchase	20	47	940
Goods available for sale		55		2470

Weighted average cost per unit =Cost of Goods available for sale / Units of Goods available for sale = 2470 / 55 =	44.9
Inventory cost = 5 units * $44.9 =	$                 225