Question

Cost Flow Methods The following three identical units of Item PX2T are purchased during April: Item PX2T Units Cost April 2 Purchase $295 April 14 Purchase 1 296 April 28 Purchase 297 Total $888 Average cost per unit $296 ($888 = 3 units) Assume that one unit is sold on April 30 for $370. Determine the gross profit for April and ending inventory on April 30 using the (a) first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) weighted average cost methods. Gross Profit Ending Inventory a. First-in, first-out (FIFO) b. Last-in, first-out (LIFO) U LILIT LJUD c. Weighted average cost

Answer 1

a)	FIFO
	Purchases
	Date	Units	Rate	Amount
	2-Apr	1	$ 295.00	$ 295.00
	14-Apr	1	$ 296.00	$ 296.00
	28-Apr	1	$ 297.00	$ 297.00
				$ 888.00
	Cost of Goods sold
	Date	Units	Rate	Amount
	30-Apr	1	$ 295.00	$ 295.00
	Ending Inventory
	Date	Units	Rate	Amount
	14-Apr	1	$ 296.00	$ 296.00
	28-Apr	1	$ 297.00	$ 297.00
				$ 593.00
	Gross Profit = $ 370 - $ 295
	=	$   75.00

b)	LIFO
Purchases
Date	Units	Rate	Amount
2-Apr	1	$ 295.00	$ 295.00
14-Apr	1	$ 296.00	$ 296.00
28-Apr	1	$ 297.00	$ 297.00
			$ 888.00
Cost of Goods sold
Date	Units	Rate	Amount
30-Apr	1	$ 297.00	$ 297.00
Ending Inventory
Date	Units	Rate	Amount
2-Apr	1	$ 295.00	$ 295.00
14-Apr	1	$ 296.00	$ 296.00
			$ 591.00
Gross Profit = $ 370 - $ 297
=	$   73.00

c)	Weighted Average
Purchases
Date	Units	Rate	Amount
2-Apr	1	$ 295.00	$ 295.00
14-Apr	1	$ 296.00	$ 296.00
28-Apr	1	$ 297.00	$ 297.00
			$ 888.00
	Average Cost		$ 296.00
Cost of Goods sold
Date	Units	Rate	Amount
30-Apr	1	$ 296.00	$ 296.00
Ending Inventory		($ 888 - $ 296)
	=	$ 592.00
Gross Profit = $ 370 - $ 297
=	$   74.00