Question

Problem 8-6 Indigo Company is a multi product firm. Presented below is information concerning one of its products, the Hawkeye. Date Transaction Quantity Price/Cost 1/1 Beginning inventory 3,500 $19 2/4 Purchase 4,500 28 2/20 Sale 5,000 47 4/2 Purchase 5,500 36 11/4 Sale 4,700 52

Calculate average-cost per unit. (Round answer to 4 decimal places, e.g. 2.7613.) Average-cost per unit $ Link to Text

Compute cost of goods sold, assuming Indigo uses: (Round average cost per unit to 4 decimal places, e.g. 2.7631 and final answers to 0 decimal places, e.g. 6,548.) Cost of goods sold (a) Periodic system, FIFO cost flow $ (b) Perpetual system, FIFO cost flow $ (c) Periodic system, LIFO cost flow $ (d) Perpetual system, LIFO cost flow $ (e) Periodic system, weighted-average cost flow $ (f) Perpetual system, moving-average cost flow $

Answer 1

Solution Required 1.: Computation of average cost per unit Step-1: Calculate Cost of Goods available for sale Date Unit cost 1/1 $19 Particulars Beginning Inventory Purchases Purchases Total Units 3500 4500 5500 13500 $28 $36 Total cost $66,500 $126,000 $198,000 $390,500 Cost of goods available for sale No. of units available for sale $390,500 13500 Step-2: Compute average cost per unit Average cost per unit = Cost of Goods available for sale / No. of units available for sale = $390,500 / 13,500 = $28.9259 Average cost per unit | $28.9259 Required 2.: Computation of cost of Goods sold (a) Periodic system, FIFO cost flow Under FIFO cost flow, inventories purchased first are issued first. We can calculate the cost of Goods sold under FIFO method as under: Total units sold = 5,000 + 4,700 = 9,700 units Units issued 3500 4500 1700 9700 Rate $19 $28 COGS $66,500 $126.000 $61,200 $253,700 $36 Cost of Goods sold $253,700

(b) Perpetual system, FIFO cost flow Inventory Balance Goods Purchased # of Cost per units Cost of Goods Sold Cost per Cost of Goods Sold unit # of units sold Date # of units Inventory Balance unit 1/1 2/4 Cost per unit $ 19.00 $ 19.00 $28.00 $ 28.00 4500 @ $ 3500 @ 3500 @ 4500 @ 30001 @ 28.00 = = = = $ $ $ $ 66,500.00 66,500.00 126,000.00 84,000.00 2/20 3500 1500 @ @ $ 19.00 $ 28.00 = = $ 66,500.00 $ 42,000.00 4/2 I 5500 @ $ 36.00 3000 @ 5500 @ 38001 @ $ 28.00 $ 36.00 $ 36.00 = = = $ 84,000.00 $ 198,000.00 $ 136,800.00 11/4 L L L 3000 1700 @ @ $28.00 $ 36.00 = = $ 84,000.00 $ 61,200.00 $ 253,700.00 Totals $ 136,800.00 FIFO Method Cost of Goods sold $ 253,700 (c) Periodic system, LIFO cost flow Under LIFO cost flow, inventories purchased last are issued first. We can calculate the cost of Goods sold under LIFO method as under: Total units sold = 5,000 + 4,700 = 9,700 units Units issued Rate COGS 5500 4200 9700 $36 $28 $198,000 $117,600 $315,600 Cost of Goods sold I $315,600 (d) Perpetual system, LIFO cost flow

Goods Purchased # of Cost per units Cost of Goods Sold Cost per Cost of Goods Sold # of units sold Date # of units unit unit 1/1 2/4 Inventory Balance Cost per Inventory Balance unit $ 19.00 = $ 66,500.00 $ 19.00 = $ 66,500.00 $ 28.00 = $ 126,000.00 $ 19.00 = $ 57,000.00 4500 @ $ 3500 3500 4500 3000 28.00 @ @ @ @ 2/20 4500 500 @ @ $ 28.00 $ 19.00 = = $ 126,000.00 $ 9,500.00 4/2 5500 @ $ 36,00 3000 5500 3000 800 @ @ @ @ $ 19.00 $ 36.00 $ 19.00 $ 36.00 = = = = 11/4 4700 @ $ 36.00 = $ 169,200.00 $ 57,000.00 $ 198,000.00 $ 57,000.00 $ 28,800.00 $ 85,800.00 Totals $ 304,700.00 LIFO Method Cost of Goods sold $ 304,700 le) Periodic system, Weighted Average cost flow Total units sold = 5,000 + 4,700 = 9,700 units Average cost per unit = $28.9259 (Refer Req.1) Cost of Goods sold = 9,700 x $28.9259 = $280,581 Cost of Goods sold $280,581

(f) Perpetual system, moving average cost flow Inventory Balance Goods Purchased # of Cost per units Cost of Goods Sold Cost per Cost of Goods Sold unit # of units sold Date # of units Inventory Balance unit 1/1 2/4 4500 @ $ 28.00 Average 2/20 4/2 Cost per unit $ 19.00 $ 19.00 $28.00 $ 24.06 $ 24.06 $ 24.06 $ 36.00 $ 31.79 $ 31.79 5000 @ $ 24.06 = 3500 @ 3500 @ 4500 @ 8000 @ 3000 @ 3000 @ 5500 @ 8500 @ 38001 @ $ 120,312.50 = = = = = = = = = $ 66,500.00 $ 66,500.00 $ 126,000.00 $ 192,500.00 $ 72,187.50 $ 72,187.50 $ 198,000.00 $ 270,187.50 $ 120,789.71 $ 120,789.71 5500 @ $ 36.00 Average 11/4 Totals 4700 @ $ 31.79 = $ 149,397.79 $ 269,710.29 Moving-average Method Cost of Goods sold $ 269,710 (a) Periodic system, FIFO cost flow (b) Perpetual system, FIFO cost flow (c) Periodic system, LIFO cost flow (d) Perpetual system, LIFO cost flow (e) Periodic system, Weighted Average cost flow (f) Perpetual system, moving average cost flow Cost of Goods sold $253,700 $253,700 $315,600 $304,700 $280,581 $269,710