Question

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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

1. FIFO.
2. LIFO.
3. Weighted average.

Answer 1

Units sold = 270 a) FIFO Out of opening Inventory = 100 x 60 Out of 1st Purchase = 150x 68 Out of 2nd Purchase = 20 x 72 Cost of goods sold 10,200 1,440 17,640 b) LIFO Out of 2nd Purchase = 200 x 72 Out of 1st Purchase = 70 x 68 Cost of goods sold 14,400 4,760 19,160 c) Weighted average 100 opening Inventory 1st Purchase 2nd Purchase Qty Amount 6,000 150 10,200 200 14,400 450 30,600 = 30,600 / 450 = 68 = 270 x 68 average cost Cost of goods sold Cost of goods sold = 18,360

Closing stock = 450 - 270 = 180 FIFO Out of 2nd Purchase = 180 x 72 12,960 Out of 1st Purchase Out of opening Inventory = - Closing stock 12,960 LIFO Out of opening Inventory = 100 x 60 Out of 1st Purchase = 80 x 68 Out of 2nd Purchase Closing stock 6,000 5,440 11,440 Weighted average opening Inventory 1st Purchase 2nd Purchase Qty Amount 100 6,000 150 10,200 200 14,400 450 30,600 = 30,600 / 450 = 68 = 180 x 68 average cost Closing stock Closing stock = 12,240