Question

Allocating product cost between cost of goods sold and ending inventory: Multiple purchases Cortez Company sells chairs that are used at computer stations. Its beginning inventory of chairs was 100 units at $60 per unit. During the year, Cortez made two batch purchases of this chair. The first was a 150-unit purchase at $68 per unit; the second was a 200-unit purchase at $72 per unit. During the period, it sold 270 chairs. Required Determine the amount of product costs that would be allocated to cost of goods sold and ending inventory, assuming that Cortez uses a. FIFO. b. LIFO. c. Weighted average.

Answer 1

	Unit	Unit cost	Total cost
Beginning inventory	100	60	6000
Purchase 1	150	68	10200
Purchase 2	200	72	14400
Total	450		30600

calculate following

	Cost of goods sold	Ending inventory
a. FIFO	(200*72+70*68) = 19160	30600-19160 = 11440
b. LIFO	(100*60+150*68+20*72) = 17640	30600-17640 = 12960
c. Weighted average	30600/450*270 = 18360	30600-18360 = 12240