Question

Causwell Company began 2021 with 26,000 units of inventory on hand. The cost of each unit was $5.00. During 2021 an additional 46,000 units were purchased at a single unit cost, and 36,000 units remained on hand at the end of 2021 (36,000 units therefore were sold during 2021). Causwell uses a periodic inventory system. Cost of goods sold for 2021, applying the average cost method, is $221,400. The company is interested in determining what cost of goods sold would have been if the FIFO or LIFO methods were used.

Required: 1. Determine the cost of goods sold for 2021 using the FIFO method. [Hint: Determine the cost per unit of 2021 purchases.] (Do not round intermediate calculations.)

Answer 1

Correct Answer:

Cost of Goods Sold (FIFO)

$ 198,000.00

Working:

A	cost of goods sold using weighted average method	$     221,400.00
B	total units sold	36000
C =A/B	cost per unit	$                  6.15
D	total units available for sale	72000
E=C*D	total cost of goods available for sale	$     442,800.00
F	Less: cost of beginning inventory	$     130,000.00
G =E-F	Total cost of46000 units purchased	$     312,800.00
H = G/46000	per unit cost of 46000 units	$                  6.80

Cost of Goods Available for sale
		Units	Cost per unit	value
Beginning Inventory	26000	$                       5.00		$              130,000.00
Purchases	46000	$                       6.80		$              312,800.00
Total	72000			$              442,800.00

	FIFO
A	Total Units Available for sale			72000		$ 442,800.00
	Units Sold			36000
	Ending Inventory Units			36000
	Valuation
	Cost of Goods Sold		26000		$                           5.00	$ 130,000.00
			10000		$                           6.80	$    68,000.00
B	Cost of Goods Sold		36000	units		$ 198,000.00
A-B	Ending Inventory		36000	units		$ 244,800.00

End of answer.

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