Question

Zurich Co. uses the perpetual inventory method. During June, the following changes in inventory item 27 took place:

June 1 Balance 1,400 units @ $24

14 Purchased 800 units @ $36

24 Purchased 700 units @ $30

8 Sold 400 units @ $50

10 Sold 1,000 units @ $40

29 Sold 500 units @ $44

What is the cost of goods sold for item 27 under the following methods? (a) FIFO __________ (b) LIFO __________

show all the works

Answer 1

Answer a: Cost of goods sold for item 27 under FIFO : $51,600

Explanation: Under FIFO perpetual inventory method, units sold on June 8 & June 10 are from beginning balance on June 1. Units sold on June 29 are from purchase made on June 14.

COGS = (1,400 units * $24) + (500 units * $36)

= $33,600 + $18,000

= $51,600.  

Answer b: Cost of goods sold for item 27 under LIFO : $48,600

Explanation: Under LIFO perpetual inventory method, units sold on June 8 & June 10 are from beginning balance on June 1. Units sold on June 29 are from purchase made on June 24.

COGS = (1,400 units * $24) + (500 units * $30)

= $33,600 + $15,000

= $48,600.