Question

You are the owner of a very small business that sells gourmet coffee.

You sell only one product, a 12-ounce bag of whole-bean French roast coffee. You sell each bag of coffee for $14 each, but due to the fluctuation in commodity prices, the price you pay your supplier to stock the product is constantly changing. In your first month of operations, you bought bags of coffee from your supplier in the following order: (a) 1 units at $2 each on January 1, (b) 7 units at $4 each on January 8, and (c) 2 units at $8 each on January 29.

Assuming you sold 6 units during the month, calculate the cost of goods available for sale, ending inventory, and cost of goods sold under the (a) FIFO, (b) LIFO, and (c) weighted average cost flow assumptions. Assume a periodic inventory system is used. (Round "Cost per Unit" to 2 decimal places.)

Answer 1

Solution a:

Computation of COGS and ending inventory - Periodic FIFO
Particulars	Cost of goods available for sale			Cost of goods sold			Ending Inventory
	Nos of units	Unit Cost	Cost of goods available for sale	Nos of units sold	Unit Cost	Cost of goods sold	Nos of units in ending inventory	Unit Cost	Ending inventory
Purchases:
1-Jan	1	$2.00	$2	1	$2.00	$2.00
8-Jan	7	$4.00	$28	5	$4.00	$20.00	2	$4.00	$8.00
29-Jan	2	$8.00	$16				2	$8.00	$16.00
Total	10		$46	6		$22.00	4		$24.00

Solution b:

Computation of COGS and ending inventory - Periodic LIFO
Particulars	Cost of goods available for sale			Cost of goods sold			Ending Inventory
	Nos of units	Unit Cost	Cost of goods available for sale	Nos of units sold	Unit Cost	Cost of goods sold	Nos of units in ending inventory	Unit Cost	Ending inventory
Purchases:
1-Jan	1	$2.00	$2				1	$2.00	$2.00
8-Jan	7	$4.00	$28	4	$4.00	$16.00	3	$4.00	$12.00
29-Jan	2	$8.00	$16	2	$8.00	$16.00
Total	10		$46	6		$32.00	4		$14.00

Solution c:

Computation of COGS and ending inventory - Periodic Weighted Average cost method
Particulars	Cost of goods available for sale			Cost of goods sold - Average cost			Ending Inventory - Average cost
	Nos of units	Unit Cost	Cost of goods available for sale	Nos of units sold	Unit Cost	Cost of goods sold	Nos of units in ending inventory	Unit Cost	Ending inventory
Purchases:
1-Jan	1	$2.00	$2
8-Jan	7	$4.00	$28
29-Jan	2	$8.00	$16
Total	10	$4.60	$46	6	$4.60	$28	4	$4.60	$18