Question

Inventory by Three Methods The units of an item available for sale during the year were as follows: Jan.1 Inventory Feb. 17 Purchase Jul. 21 Purchase Nov. 23 Purchase 8 units 9 units 7 units 11 units $48 per unit $49 per unit $52 per unit $53 per unit There are 21 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost under each of the following methods. a. Determine the inventory cost by the first-in, first-out method. b. Determine the inventory cost by the last-in, first-out method. c. Determine the inventory cost by the average cost method. When computing your answer, round the average cost per unit to the nearest whole dollar

Answer 1

a.     FIFO Method of Inventory:

        Inventory:

                8 units at $48..................................................................... $384

                 9 units at $49.....................................................................   441

              17 units................................................................................ $825

        Merchandise sold:

$1772 – $825....................................................................... $947

b. LIFO Method of Inventory:

        Inventory:

                7 units at $52..................................................................... $364

   11 units at $53.....................................................................    583

18 units................................................................................    $947

        Merchandise sold:

              $1772 – $947........................................................................ $825

c.     Average cost method of Inventory:

        Inventory:

              21 units at $50.6 ($1,772/35 units)..................................... $1063

        Merchandise sold:

              $1,772 – $1063..................................................................... $709

Answer 2