Question

What is decision making? Who is responsible for decision making in a managerial situation? 

Complete the inventory cost card assuming the business maintains a perpetual inventory system and calculates the cost of merchandise sold and ending inventory using 

A) LIFO B) LIFO 

1 Beginning inventory, purchases, and sales data for widgets are as follows: 

April 3 Inventory 15 units @ $30 

11 Purchase 12 units @ $27 

14 Sale 18 units 

21 Purchase 7 units @ $25 

25 Sale 10 units 

Answer 1

Inventory Valuation - Perpetual FIFO

	Purchases	Cost of Merchandise Sold	Inventory
Date	Qty.	Unit Cost	Total Cost	Qty.	Unit Cost	Total Cost	Qty.	Unit Cost	Total Cost
April 3							15	$30	$450
11	12	$27	$324				15 12	$30 $27	$450 $324
14				15 3	$30 $27	$450 $81	9	$27	$243
21	7	$25	$175				9 7	$27 $25	$243 $175
25				9 1	$27 $25	$243 $25	6	$25	$150

Cost of Merchandise sold = 450 + 81 + 243 + 25

= $799

Ending Inventory = 6 units * $25

= $150

Inventory Valuation - Perpetual LIFO

	Purchase	Cost of Merchandise Sold	Inventory
Date	Qty.	Unit Cost	Total Cost	Qty.	Unit Cost	Total Cost	Qty.	Unit Cost	Total Cost
April 3							15	$30	$450
11	12	$27	$324				15 12	$30 $27	$450 $324
14				12 6	$27 $30	$324 $180	9	$30	$270
21	7	$25	$175				9 7	$30 $25	$270 $175
25				7 3	$25 $30	$175 $90	6	$30	$180

Cost of Merchandise Sold = 324 + 180 + 175 + 90

= $769

Ending Inventory = 6units * $30

=$180

Calculation of profit for FIFO and LIFO if all units were sold for $50 each

Quantity sold = 18 units + 10 units

= 28 units

Total cost of goods sold = quantity sold * price

= 28 * 50

= $1400

According to FIFO,

Gross Profit = 1400 - 799

= $601

According to LIFO,

Gross Profit = 1400 - 769

= $631