Question

are on hand. A Data Table of goods sold of units sold ar cost, then (c) hiding inventory using (a) specific Round all final answers to the nearest Oct 1 Beginning inventory.... 10 units @ $ 15 Purchase 5 units @ 26 Purchase ............ 14 units @ 160 = $ 1,600 161 = $ 805 170 = $ 2,380 Print Done t fields and then click Check Answer. Clear All Check Answer o Bts e Ô . 9

Answer 1

Required 1:

Answer:

	No of Units	Specific identification	Average cost	FIFO	LIFO
Cost of goods sold	18	2,985	2,970	2,915	3,024
Ending Inventory	11	1,800	1,815	1,870	1,761

Calculation:

​(a) Specific identification, with seven $160 units and four $170 units still on hand at the end

Cost of Goods Sold Calculation:

Date	Inventory Layer	Units sold			Cost		Cost of goods sold
Oct-01	Beginning inventory	3 units		x	$160	=	$480
15	Purchase	5 units		x	$161	=	$805
26	Purchase	10 units		x	$170	=	$1,700
		18 units					$2,985

Calculation of ending inventory  :

Date	Inventory Layer	Units on hand				Cost		Ending inventory
Oct-01	Beginning inventory	7 units			x	$160	=	$1,120
15	Purchase	0 units			x	$161	=	$0
26	Purchase	4 units			x	$170	=	$680
		11 units						$1,800

​(b) Average Cost

Cost of goods available	/	Number of units available	=	Average cost per unit
$4,785	/	29	=	$165.00

So using the above average cost, we need to calculate the cost of goods sold and ending inventory.

Cost of goods sold:

Average cost per unit	x	Units sold	=	Cost of goods sold
$165.00	x	18	=	$2,970

Ending inventory:

Average cost per unit	x	Units in ending inventory	=	Ending inventory
$165.00	x	11	=	$1,815

​(c) FIFO

Here the first costs into inventory are the first costs assigned to cost of goods sold. Under​ FIFO, the cost of ending inventory is always based on the latest costs incurred.

Cost of Units sold:

Date	Inventory Layer	Units sold			Cost		Cost of goods sold
Oct-01	Beginning inventory	10 units		x	$160	=	$1,600
15	Purchase	5 units		x	$161	=	$805
26	Purchase	3 units		x	$170	=	$510
		18 units					$2,915

Calculation of ending Inventory:

Date	Inventory Layer	Units in hand			Cost		Ending Inventory cost
Oct-01	Beginning inventory	0 units		x	$160	=	$0
15	Purchase	0 units		x	$161	=	$0
26	Purchase	11 units		x	$170	=	$1,870
		11units					$1,870

​(d) LIFO

Under​ LIFO, the last costs into inventory go immediately to cost of goods sold. Under​ LIFO, the cost of ending inventory is always based on the oldest costs.

beginning inventory plus the early purchases of the period. ​

Cost of Units sold:

Date	Inventory Layer	Units sold		Cost		Cost of goods sold
Oct-01	Beginning inventory	0 unit	x	$160	=	$0
15	Purchase	4 units	x	$161	=	$644
26	Purchase	14 units	x	$170	=	$2,380
		18 units				$3,024

Calculation of ending Inventory:

Date	Inventory Layer	Units in hand		Cost		Ending inventory
Oct-01	Beginning inventory	10 units	x	$160	=	$1,600
15	Purchase	1 unit	x	$161	=	$161
26	Purchase	0 unit	x	$170	=	$0
		11 units				$1,761

Required 2:

Answer:

a. Which method produce the highest cost of goods sold :LIFO

b. Which method produce the lowest cost of goods sold : FIFO

c. The difference in cost of goods sold under the two methods identified above was caused by the increase in inventory unit cost.

Explanation:

From the above calculation we can infer that LIFO produce highest Cost of goods sold(COGS) and FIFO produce lowest COGS. LIFO uses the cost of the last purchased inventory to determine cost of goods sold. Inflation tells the most recently purchased inventory is the most costly inventory. So, LIFO and increasing prices produce the highest COGS and FIFO produces the lowest COGS.