Question

eBook Show Me How Calculator Periodic Inventory by Three Methods The units of an item available for sale during the year were as follows: Jan. 1 Inventory 1,095 units $136 Feb. 17 Purchase 1,400 units @ $137 1,605 units @ $138 July 21 Purchase Nov. 23 Purchase 1,145 units $140 There are 1,220 units of the item in the physical inventory at December 31. The periodic inventory system is used. a. Determine the inventory cost by the first-in, first-out method. b. Determine the inventory cost by the last-in, first-out method. Determine the inventory cost by the weighted average cost method. Do not round intermediate calculation and round final answer to the nearest whole dollar. Previous Nes Check My Work mi d

Answer 1

Answer a)

Inventory cost by the first-in, first-out method = $170,650

Explanation :

As per first in first out (FIFO) method, the inventory purchased first is sold first. Which means the ending inventory consists of most recent purchases. Therefore, the ending inventory consists of 1,145 units @ 140/unit purchased on Nov 23 and the remaining 75 units (1,220 - 1,145) @ $138/unit purchased on July 21.

Cost of Ending Inventory = (1,145 * $140) + (75 * $138)

= $160,300 + $10,350

= $170,650

Answer b)

Inventory cost by last-in, first-out method = $166,045

Explanation :

As per the last in first out (LIFO) method, the inventory purchased last is sold first. Which means the ending inventory consists of the beginning inventory and the inventory purchased first. Therefore, the ending inventory consists of 1,095 units @ $136/unit i.e. the beginning inventory and the remaining 125 (1,220 - 1,095) @ $137/unit purchased on Feb 17.

Cost of Ending Inventory = (1,095 * $136) + (125 * $137)

= $148,920 + $17,125

= $166,045

Answer c)

Inventory cost by weighted average cost method = $168,058

Explanation :

Date	Units	Unit Cost	Total Cost
Jan 1	1,095	$136	$148,920
Feb 17	1,400	$137	$191,800
July 21	1,605	$138	$221,490
Nov 23	1,145	$140	$160,300
Total	5,245		$722,510

Weighted Average Cost per unit = Cost of Goods Available for Sale / Total Units Available for Sale

Cost of Goods Available for Sale = $722,510

Total Units Available for Sale = 5,245

Weighted Average Cost per unit = $722,510 / 5,245

Weighted Average Cost of Ending Inventory = Ending Inventory Units * Weighted Average Cost per unit

= 1,220 * $722,510 / 5,245

= $168,057.61

= $168,058 (rounded off to the nearest whole dollar)

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