Question

The beginning inventory was 440 units at a cost of $10 per unit. Goods available for sale during the year were 1,720 units at a total cost of $19,020. In May, 740 units were purchased at a total cost of $8,140. The only other purchase transaction occurred during October. Ending inventory was 760 units. Required: a. Calculate the number of units purchased in October and the cost per unit purchased in October. Purchased in October Number of units 5401 Cost per unit $ 12 b-1. Assume the periodic inventory system is used. Calculate cost of goods sold and ending inventory using FIFO method. (Enter all values as a positive value.) Periodic FIFO Cost of Goods Sold Cost of Goods Available for Sale # of Cost per Cost of Goods Available for units unit Sale 440 $ 10 S 4,400 # of units sold Cost per unit Cost of Goods Sold Inventory Balance # of units in Cost per ending Ending unit Inventory inventory 440 $ 10 $ 4,400 Beg. Inventory Purchases: May October 11 8,140 440 11 4,840 740 540 1,720 12 6,480 19,020 Total S 0 S 0 880 $ 9,240

Answer 1

Cost per a) Total Cost # of Units 1,720 Unit $19,020 Cost of Goods Available for Sale Less: Cost of Beginning Inventory Cost of Goods Purchased in May Cost of Goods Purchased in October -440 -740 $10 $11 $12 $4,400 (440 units x $10] -$8,140 [Rate = $8140 / 740 units = $11] $6,480 [Rate = $6480 / 540 units = $12] 540 That is, Purchased in October Number of units 540 Cost per unit $12 b-1) FIFO stands for First In First Out which means that cost of goods sold must consider cost of those goods earlier. As a result, ending inventory will contain cost of units recently purchased. It means that ending inventory of 760 units should consist of 540 units from units purchased in October & balance 220 units from units purchased in May. That is, cost of goods sold shall consist of 440 units from beginning inventory and balance 520 units shall be from units purchased in May.

Cost per PERIODIC FIFO: Cost of Goods Available for Sale Cost of Goods Sold Inventory Balance COG # of # of Cost per # of Cost per Cost of Ending Available Units in Ending Units Unit Units Sold Unit Goods Sold Inventory Unit for Sale Inventory Beg. Inventory 440 $10 $4,400 440 $10 $4,400 0 $10 $0 Purchases: May 740 $11 $8,140 520 $11 $5,720 220 $11 $2,420 October 540 $12 $6,480 0 $12 $0 540 $12 $6,480 Total 1,720 $19,020 960 $10,120 760 $8,900 b-2) LIFO stands for Last In First Out which means that cost of goods sold must consider cost of those goods recently. As a result, ending inventory will contain cost of units initially purchased or beginning inventory. It means that ending inventory of 760 units should consist of 440 units from units of beg. Inventory and bal. 320 units from units purchased in May. That is, cost of goods sold shall consist of 540 units from units purchased in October and balance 420 units shall be from units purchased in May. PERIODIC FIFO: Cost of Goods Available for Sale Cost of Goods Sold Inventory Balance COG # of # of Cost per # of Cost per Cost of Ending Available Units in Ending Units Unit Units Sold Unit Goods Sold Unit Inventory for Sale Inventory Beg. Inventory 440 $10 $4,400 0 $10 $0 440 $10 $4,400 Purchases: May 740 $11 $8,140 420 $11 $4,620 320 $11 $3,520 October 540 $12 $6,480 $12 $6,480 0 $0 Total 1,720 $19,020 960 $11,100 760 $7,920 Cost per 540 $12.