Question

Cortez Company sells chairs that are used at computer stations. Its beginning inventory of chairs was 190 units at $49 per unit. During the year, Cortez made two batch purchases of this chair. The first was a 265-unit purchase at $54 per unit; the second was a 360-unit purchase at $56 per unit. During the period, it sold 475 chairs. Required Determine the amount of product costs that would be allocated to cost of goods sold and ending inventory, assuming that Cortez uses a. FIFO. b. LIFO. c. Weighted average. (Do not round intermediate calculations. Round your final answers to nearest whole dollar amount.) FIFO LIFO Weighted Average $ 25,517 $ 24,740 $ 26,370 Cost of goods sold Ending inventory

Answer 1

Solution:

	FIFO	LIFO	Weighted Average
Cost of goods sold	$ 24,740	$ 26,370	$ 25,516
Ending Inventory	$ 19,040	$ 17,410	$ 18,264

Working :

a. FIFO

under FIFO Method , Inventory purchased first will be sold first .

Calculation of Cost of Goods sold using FIFO :

	Units (a)	Cost per unit (b)	Total cost (c = a*b)
begining inventory	190	$ 49	$ 9,310
First Purchase	265	$ 54	$ 14,310
Second Purchase ( 475 - 190 - 265 )	20	$ 56	$ 1,120
	475		$ 24,740

Calculation of Ending inventory using FIFO :

	Units (a)	Cost per unit (b)	Total cost (c = a*b)
Second Purchase ( 360 - 20 )	340	$ 56	$ 19,040

b. LIFO

under LIFO Method , Inventory purchased Last, will be sold first .

Calculation of Cost of Goods sold using LIFO :

	Units (a)	Cost per unit (b)	Total cost (c = a*b)
Second Purchase	360	$ 56	$ 20,160
First Purchase ( 475 - 360 )	115	$ 54	$ 6,210
Total	475		$ 26,370

Calculation of Ending inventory using LIFO :

	Units (a)	Cost per unit (b)	Total cost (c = a*b)
First Purchase ( 265 - 115 )	150	$ 54	$ 8,100
begining inventory	190	$ 49	$ 9,310
Total	340		$ 17,410

c. Weighted Average

under Weighted Average Method , Inventory is sold on Average price .

Calculation of average cost per unit of inventory :

	Units (a)	Cost per unit (b)	Total cost (c = a*b)
begining inventory	190	$ 49	$ 9,310
First Purchase	265	$ 54	$ 14,310
Second Purchase	360	$ 56	$ 20,160
	815		$ 43,780
Average Cost per unit ( c / a )		$ 53.7178

Calculation of Cost of Goods sold using Weighted Average Method:

= units sold * Average cost per unit

= 475 * 53.7178

= $ 25,515.96

Calculation of Ending inventory using Weighted Average Method:

= ( Total units - Units sold ) * Average cost per unit

= ( 815 - 475 ) * 53.7178

= 340 * 53.7178

= $ 18,264.05

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