Question

Problem 6-2A Grouper Corp. markets CDs of numerous performing artists. At the beginning of March, Grouper Corp. had in beginning inventory 2,470 CDs with a unit cost of $7. During March, Grouper Corp. made the following purchases of CDs. March 5 2,090 8 March 21 5,110$10 March 13 3,570 9March 26 2,180$11 During March 12,280 units were sold. Grouper Corp. uses a periodic inventory system (a) Determine the cost of goods available for sale. The cost of goods available for sale (b) Calculate Average Cost. (Round answer to 3 decimal places,e.g.5.125.) Average Cost

Answer 1

Solution Particulars Units Unit cost Total cost Date $7$17,290 March 1 Beginning Inventory 2470 $8$16,720 Purchases March 5 2090 $9$32,130 March 13 Purchases 3570 $10$51,100 March 21 Purchases 5110 $11 $23,980 March 26 Purchases 2180 $141,220 Total 15420 $141,220 The cost of goods available for sale Total cost/Total units Average unit cost 141,220/15420 units $9.158 $9.158 Average cost per unit Requirement Determine (1) the ending inventory, and (2) the cost of goods sold Total Units available for sale 15420 units Units Sold 12280 units Ending inventory 3140 units

Total units sold = 12280 units Under FIFO method, inventories first purchased are issued issued We can calculate the Cost of Goods sold under FIFO method as under: Units issued Rate Cost 2470 17,290 16,720 2090 32,130 3570 10 41,500 4150 $107,640 12280 $107,640 Cost of goods sold (FIFO Method) Ending Inventory (F IFO Meth Ending inventory Total cost of inventory Cost of goods sold -$141,220 $107,640 $33 580 Total units sold 12280 units Under LIFO method, inventories last purchased are issued issued We can calculate the Cost of Goods sold under LIFO method as under: Units issued Rate Cost 23,980 2180 10 51,100 5110 3570 11,360 1420 12280 118,570 $118,570 Cost of goods sold (LIFO Method)

Ending inventory Total cost of inventory Cost of goods sold -$141,220- $118,570 $22,650 Cost of goods soldUnits sold x Average unit cost $112,463 = 12280 units x $9.158 = Total ending inventory = Ending inventory units x weighted average unit cost -3140 units x $9.158 - $28,757 AVERAGE FIFO LIFO COST $22,650$28,757 33,580$ The ending inventory 107,640 $118,570 $112,463 The cost of goods sold Requirement 4 Which cost flow method results in 1 the highest inventory amount for the balance sheet, and (2) the highest cost of goods sold for the FIFO produces the highest inventory amount, $33,580. LIFO produces the highest cost of goods sold, $118,570.