Question

Periodic Inventory Using FIFO, LIFO, and Weighted Average Cost Methods

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

Jan. 1	Inventory	7	units at $30	$210
Aug. 13	Purchase	17	units at $31	527
Nov. 30	Purchase	18	units at $33	594
Available for sale		42	units	$1,331

There are 21 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost using the (a) first-in, first-out (FIFO) method; (b) last-in, first-out (LIFO) method; and (c) weighted average cost method (round per-unit cost to two decimal places and your final answer to the nearest whole dollar).

a.	First-in, first-out (FIFO)	$
b.	Last-in, first-out (LIFO)	$
c.	Weighted average cost	$

Answer 1

Answer a:

First In First Out method inventory purchased first will be sold first.

At December 31 21 units are remaining out of 42 units. Hence total sold during the year is 42-21 =21.

There were 7 units of $30 which will be sold first Remaining units to be sold is 21-7 = 14 units

there are 17 units of $31, hence 14 will be sold from this stock and 17-14 =3 units will remain as inventory.

Inventory value = 3*31 = $93 and 18 units at $33 will remain as is.

Hence total inventory cost = 93+594 = $687

Hence answer is 687

Answer b

Last In First Out method inventory purchased last will be sold first.

There were 18 units of $33 which came last hence will be sold first Remaining units to be sold is 21-18 = 3 units

there are 17 units of $31 which came before last, hence 3 will be sold from this stock and 17-3 =14 units will remain as inventory.

Inventory value = 14*31 = $434 and 7 units at $30 will remain as is.

Hence total inventory cost = 434+210 = $644

Hence answer is 644

Answer c

Weighted Average Cost = Total Cost/ Total units = 1331/42 = $31.69

21 units is sold and 21 is remaining.

Hence Inventory cost = Units remaining * Weighted Average cost= 21* 31.69 = $665.50

Hence answer is 665