Question

Exercise 6-8 Moath Company reports the following for the month of June. Units Unit Cost Total Cost June 1 Inventory 560 $5 $ 2,800 12 Purchase 1,120 7 7,840 23 Purchase 840 10 8,400 30 Inventory 280 Calulate Weighted Average Unit Cost. (Round answer to 2 decimal places, e.g. 15.25.) Weighted Average Unit Cost $ Compute the cost of the ending inventory and the cost of goods sold using the average-cost method. (Round answers to 0 decimal places, e.g. 1,250.) The ending inventory $ The cost of goods sold $ LINK TO TEXT Will the results in (a) be higher or lower than the results under FIFO and LIFO? Ending inventory is than FIFO $ and than LIFO $. In contrast, cost of goods sold is than FIFO $ and than LIFO $.

Answer 1

Ans.1	Weighted average cost method:
	Date	Units	Unit cost	Total cost
	1-Jun	560	5	2800
	12-Jun	1120	7	7840
	23-Jun	840	10	8400
		2520		19040
	Weighted average unit cost   =   Total cost / Total units
			19040 / 2520
			7.55555
			or 7.56
	Cost of Ending inventory = Weighted average unit cost * Ending inventory units
			7.5555 * 280
			2116
	Units sold = Units available for sale - Ending inventory units
		2520 - 280
		2240
	Cost of goods sold = Weighted average unit cost * Units sold
			7.5555 * 2240
			16924
Ans.2	FIFO: (Periodic)
	Ending inventory
	Date	Units	Unit cost	Total cost
	23-Jun	280	10	2800
	Cost of goods sold:
	Date	Units	Unit cost	Total cost
	1-Jun	560	5	2800
	12-Jun	1120	7	7840
	23-Jun	560	10	5600
		2240		16240
	*While using the FIFO the Ending inventory will be higher and the cost of goods sold will be lower than using the weighted average cost method.
	LIFO: (Periodic)
	Ending inventory
	Date	Units	Unit cost	Total cost
	1-Jun	280	5	1400
	Cost of goods sold:
	Date	Units	Unit cost	Total cost
	23-Jun	840	10	8400
	12-Jun	1120	7	7840
	1-Jun	280	5	1400
		2240		17640
	*While using the FIFO the Ending inventory will be lower and the cost of goods sold will be higher than using the weighted average cost method.