Question

Waterway Industries markets CDs of numerous performing artists. At the beginning of March, Waterway had in beginning inventory 2.500 CDs with a unit cost of $6. During March Waterway made the following purchases of CDs. March 5 2.200 @ $7 @ March 21 March 26 5,200 2,200 $9 $10 March 13 3,900 @ $8 @ During March 12,200 units were sold. Waterway uses a periodic inventory system. Determine the cost of goods available for sale. The cost of goods available for sale $ Calculate Average Cost. (Round answer to 3 decimal places, s. 5.125) Average Costs e Textbook and Media List of Accounts

Answer 1

Answer a.

Cost of goods available for sale = 2,500 * $6.00 + 2,200 * $7.00 + 3,900 * $8.00 + 5,200 * $9.00 + 2,200 * $10.00
Cost of goods available for sale = $130,400

Answer b.

Number of units available for sale = 2,500 + 2,200 + 3,900 + 5,200 + 2,200
Number of units available for sale = 16,000

Average cost per unit = Cost of goods available for sale / Number of units available for sale
Average cost per unit = $130,400 / 16,000
Average cost per unit = $8.15

Answer c.

FIFO:

Cost of goods sold = 2,500 * $6.00 + 2,200 * $7.00 + 3,900 * $8.00 + 3,600 * $9.00
Cost of goods sold = $94,000

Cost of ending inventory = Cost of goods available for sale - Cost of goods sold
Cost of ending inventory = $130,400 - $94,000
Cost of ending inventory = $36,400

LIFO:

Cost of goods sold = 2,200 * $10.00 + 5,200 * $9.00 + 3,900 * $8.00 + 900 * $7.00
Cost of goods sold = $106,300

Cost of ending inventory = Cost of goods available for sale - Cost of goods sold
Cost of ending inventory = $130,400 - $106,300
Cost of ending inventory = $24,100

Average Cost:

Cost of goods sold = Average cost per unit * Number of units sold
Cost of goods sold = $8.15 * 12,200
Cost of goods sold = $99,430

Cost of ending inventory = Cost of goods available for sale - Cost of goods sold
Cost of ending inventory = $130,400 - $99,430
Cost of ending inventory = $30,970

Answer d.

FIFO produces the highest inventory amount.
LIFO produces the highest cost of goods sold.