Question

The Griggs Company is a multi-product firm. Presented below is information concerning one of their products for the year.

Date	Activity	Units Purchased	Cost/Unit	Total Cost
January 1	BI	1,000	$12	$12,000
February 4	Purchase	2,000	$18	$36,000
February 20	Sale	2,500	$23	$57,500 ($57,500 / 2,500 = $23)
April 20	Purchase	3,000	22	$66,000
November 14	Sale	2,000	???? (give formula, not just answer)	???? (give formula, not just answer)

Instructions:

Determine both Ending Inventory (EI) and Cost of Goods Sold (COGS) under each of the following methods.

Next, calculate gross profit under each, assuming that the selling price per unit was:

$23 for goods sold on February 20, and

$30 for units sold on November 14

***Give formulas, not just answers, please. Thank you.***

Method	EI	COGS	Gross Profit
FIFO, periodic
FIFO, perpetual
LIFO, periodic
LIFO, perpetual
Weighted-average
Moving-average

Answer 1

a) FIFO, periodic

Ending Inventory in units = Beginning Inventory+Units purchased-Units sold

= 1,000+(2,000+3,000)-(2,500+2,000)

= 1,000+5,000-4,500 = 1,500 units

Cost of Ending Inventory = 1,500 units*$22 per unit = $33,000 (Ending Inventory will be from purchase made on April 20 at the unit cost of $22).

Cost of goods sold = Beginning Inventory+Purchases-Ending Inventory

= $12,000+($36,000+$66,000)-$33,000 = $81,000

Sales = Sales on Feb 20+Sales on Nov 14

= $57,500+(2,000*$30) = $57,500+$60,000 = $117,500

Gross Profit = Sales - Cost of goods sold = $117,500-$81,000 = $36,500

b)   FIFO, perpetual

Cost of Ending Inventory, Cost of goods sold and Gross profit under FIFO, perpetual will be same as per FIFO, periodic.

Ending Inventory = $33,000

Cost of goods sold = $81,000

Gross Profit = $36,500

c) LIFO, periodic

Ending inventory of 1,500 will include 1,000 units from beginning inventory and 500 units from purchase made on February 4.

Cost of Ending Inventory = (1,000 units*$12)+(500 units*$18)

= $12,000+$9,000 = $21,000

Cost of goods sold = Beginning Inventory+Purchases-Ending Inventory

= $12,000+($36,000+$66,000)-$21,000 = $93,000

Gross Profit = Sales - Cost of goods sold = $117,500 - $93,000 = $24,500

d) LIFO, perpetual

On Feb 20, total goods available for sale is 3,000 units (1,000 units Beg Inventory+2,000 units Purchase on Feb 4). As per LIFO, perpetual method the ending inventory on Feb 20 of 500 units will be from Beginning inventory at cost of $12 per unit. On Nov 14, the units sold of 2,000 will be from purchase made on April 20 at cost of $22 per unit. Thus ending Inventory will be 500 units from beginning inventory and 1,000 units (3,000 - 2,000) from purchase made on April 20.

Cost of Ending Inventory = (500 units*$12 per unit)+(1,000 units*$22 per unit)

= $6,000+$22,000 = $28,000

Cost of goods sold = Beginning Inventory+Purchases-Ending Inventory

= $12,000+($36,000+$66,000)-$28,000 = $86,000

Gross Profit = Sales - Cost of goods sold = $117,500 - $86,000 = $31,500

e) Weighted Average

Weighted Average cost per unit = Total cost of goods available for sale/Units available for sale

= ($12,000+$36,000+$66,000)/(1,000+2,000+3,000)

= $114,000/6,000 = $19 per unit

Cost of Ending Inventory = 1,500 units*$19 per unit = $28,500

Cost of goods sold = Beginning Inventory+Purchases-Ending Inventory

= $12,000+($36,000+$66,000)-$28,500 = $85,500

Gross Profit = Sales - Cost of goods sold = $117,500 - $85,500 = $32,000

f) Calculation of Cost of goods sold under Moving Average (Amounts in $)

Date	Purchased	Sold	Balance
Jan 1			1,000*$12 = $12,000
Feb 4	2,000*$18 = $36,000		3,000*$16 [($12,000+$36,000)/3,000 units]
Feb 20		2,500*$16 = $40,000	500*$16 = $8,000
April 20	3,000*$22 = $66,000		3,500*$21.142857 [($8,000+$66,000)/3,500 units]
Nov 14		2,000*$21.142857 = 42,286	1,500*$21.142857 = $31,714
Total		82,286

Cost of goods sold = $82,286

Ending Inventory = $31,714

Gross Profit = Sales - Cost of goods sold

= $117,500 - $82,286 = $35,214

Method	EI	COGS	Gross Profit
FIFO, periodic	33,000	81,000	36,500
FIFO, perpetual	33,000	81,000	36,500
LIFO, periodic	21,000	93,000	24,500
LIFO, perpetual	28,000	86,000	31,500
Weighted-average	28,500	85,500	32,000
Moving-average	31,714	82,286	35,214