Question

Periodic Inventory by Three Methods The units of an item available for sale during the year were as follows: Jan. 1 Inventory Feb. 17 Purchase 1,095 units @ $120 1,380 units @ $121 1,625 units @ $122 Jul. 21 Purchase Nov. 23 Purchase 1,140 units @ $124 There are 1,215 units of the item in the physical inventory at December 31. The periodic inventory system is used. Do not round intermediate calculation and round final answer to nearest whole value. a. Determine the inventory cost by the first-in, first-out method. $ 487,480 x b. Determine the inventory cost by the last-in, first-out method. $ 492,070 x c. Determine the inventory cost by the weighted average cost method. Feedback

Answer 1

Answer:-

a. Inventory cost by First-in-First-Out Method

Number of units as on December 31 = 1215

As per First-in-First-Out Method, the sales are assumed to me made from the oldest inventory. Hence in this case the closing inventory of 1,215 units shall be assumed to be belonging to purchases made on November 23 (1,140 units @ $124) and July 21 (1215-1140 = 75 units @ $122).

Inventory Cost = [1140*124]+[75*122] = $150,510

b. Inventory cost by Last-in-First-Out Method

Number of units as on December 31 = 1215

As per Last-in-First-Out Method, the sales are assumed to me made from the latest inventory. Hence in this case the closing inventory of 1,215 units shall be assumed to be belonging to opening inventory (1095 units @ $120) and purchases made on February  17 (1215-1095 = 120 units @ $121)

Inventory Cost = [1095*120]+[120*121] = $ 145,920

c. Inventory Cost by Weighted Average Cost Method

Date	Units	Rate	Amount
Jan 1 - Opening Inventory	1,095	120	131,400
Feb 17 - Purchase	1,380	121	166,980
July 21 - Purchase	1,625	122	198,250
Nov. 23 - Purchase	1,140	124	141,360
Total	5,240	--	637,990

Weighted Average Cost = Total Cost of units/Total No. of units = 637990/5240 = 121.75

Inventory Cost = [1215*121.75] = $ 147,926