Question

Please answer asap

1. Elston Company had a beginning inventory of 200 units at a cost of rm12 per unit on August 1. During the month, the following purchases and sales were made.

            Purchases                                           ______________Sales     ________           

August 4     250 units at RM13/unit                   August      7          150 units @ RM20

August 15   350 units at RM15/unit                   August      11        100 units @ RM20

August 28   200 units at RM14/unit                   August      17        250 units @ RM25

                                                                          August      24        260 units @ RM25

Elston uses a perpetual inventory system.

Required:

1. Determine ending inventory and cost of goods sold under:

1. average cost, and
2. FIFO.

2. Compute gross profit for the month of August using:

a) average cost, and

b) FIFO.          

(6marks)

Answer 1

	AVERAGE-COST	FIFO
Ending inventory	Rm 5364	Rm 5400
Cost of goods sold	Rm 10336	Rm 10300
Gross Profit	Rm 7414	Rm 7450

I.a. Computation of cost of Ending inventory and Cost of goods sold using Average method is as follows:
Date	Number of Units Purchased	Cost per Unit	Purchase Cost	Number of Units Sold	Cost per Unit	Cost of Goods Sold	Number of Units Balance	Cost per Unit	Inventory Balance
August 1							200	Rm 12	Rm 2400
August 4	250	Rm 13	Rm 3250				200	Rm 12	Rm 2400
							250	Rm 13	Rm 3250
							450	Rm 12.56	Rm 5650
August 7				150	Rm 12.56	Rm 1883	300	Rm 12.56	Rm 3767
August 11				100	Rm 12.56	Rm 1256	200	Rm 12.56	Rm 2511
August 15	350	Rm 15	Rm 5250				200	Rm 12.56	Rm 2511
							350	Rm 15	Rm 5250
							550	Rm 14.11	Rm 7761
August 17				250	Rm 14.11	Rm 3528	300	Rm 14.11	Rm 4233
August 24				260	Rm 14.11	Rm 3669	40	Rm 14.11	Rm 564
August 28	200	Rm 24	Rm 4800				40	Rm 14.11	Rm 564
							200	Rm 24	Rm 4800
Total	800		Rm 13300	760		Rm 10336	240		Rm 5364
Ending Inventory is Rm 5,364
Cost of goods sold is Rm 10,336

Calculation of Gross Profit:

Gross profit under average cost = Sales - Cost of goods sold

= Rm 17,750 - Rm 10,336

= Rm 7,414

Gross profit under FIFO = Sales - Cost of goods sold

= Rm 17,750 - Rm 10,300

= Rm 7,450

Working note:

Sales = ( 150 * Rm 20 ) + ( 100 * Rm 20 ) + ( 250 * Rm 25 ) + ( 260 * Rm 25 )

= Rm 17,750