The following transactions occurred for the month: 90,000 units were sold for $20 each. Units Cost...
The following transactions occurred for the month: 90,000 units were sold for $20 each. Units Cost Total Beginning Balance 15,000 Purchase 1 20,000 $10 Purchase 2 27,000 $12 Purchase 3 38,000 $16 Weighted Average Unit Cost: Calculate the Cost of Goods Sold, Ending inventory, and Gross Profit for the month under FIFO, LIFO, and Weighted Average. FIFO: Sales $ Less: Cost of Goods Sold $ Gross Profit $ Ending Inventory $
Homework Answers
Note : In the given question, the data relating to the cost of material in the opening balance is missing. Hence it is assumed that 15000 is the quantity of the opening stock and the value has been assumed at $10 per unit which is equal to $1,50,000( 15000 x10). Kindly replace the valuue per unit with the actual rate . All the calculations are based on the above assumption regarding the opening balance.
FIFO method indicates that the goods which were bought first have been sold out first . Hence the last purchases will remain in the closing inventory.
LIFO method indicates that the goods which were bought last were sold out first and hence the first purchases will remain in the closing inventory.
Weighted average method indicates that the average price of goods is considered for valuation of inventories .
| COGS = Opening + Purchases - Closing Inventory | ||||
| A. | Computation of Cost of Closing Inventory under different methods | |||
| FIFO | ||||
| Particulars | Units | Rate | Amount | |
| Opening balance | 15,000 | $ 10 | $ 150,000 | |
| Add: | Purchases | 120,000 | $ 10 | $ 1,200,000 |
| 227,000 | $ 12 | $ 2,724,000 | ||
| 338,000 | $ 16 | $ 5,408,000 | ||
| TOTAL | 700,000 | 9,482,000 | ||
| Less : | Sales | 90,000 | $ 20 | $ 1,800,000 |
| Closing Inventory | 610,000 | 8,582,000 | ||
| 338000 @ 16 | 338,000 | 16 | $ 5,408,000 | |
| 227000 @ 12 | 227,000 | 12 | $ 2,724,000 | |
| 45000 @ 10 | 45,000 | 10 | $ 450,000 | |
| ( 610000-338000-227000) | ||||
| COGS | 90,000 | 900,000 | ||
| LIFO | ||||
| Opening balance | 15,000 | $ 10 | $ 150,000 | |
| Add: | Purchases | 120,000 | $ 10 | $ 1,200,000 |
| 227,000 | $ 12 | $ 2,724,000 | ||
| 338,000 | $ 16 | $ 5,408,000 | ||
| TOTAL | 700,000 | 9,482,000 | ||
| Less : | Sales | 90,000 | $ 20 | $ 1,800,000 |
| Closing Inventory | 610,000 | 8,042,000 | ||
| 15000*10 | 15,000 | 10 | $ 150,000 | |
| 120000 @ 10 | 120,000 | 10 | $ 1,200,000 | |
| 227000 @ 12 | 227,000 | 12 | $ 2,724,000 | |
| 248000 @ 16 | 248,000 | 16 | $ 3,968,000 | |
| 338000-(610000-15000-120000-227000) | ||||
| COGS | 90,000 | 16 | 1,440,000 | |
| Weighted Average | ||||
| Opening balance | 15,000 | $ 10 | $ 150,000 | |
| Add: | Purchases | 120,000 | $ 10 | $ 1,200,000 |
| 227,000 | $ 12 | $ 2,724,000 | ||
| 338,000 | $ 16 | $ 5,408,000 | ||
| TOTAL | 700,000 | 13.55 | 9,482,000 | |
| Less : | Sales | 90,000 | $ 20 | $ 1,800,000 |
| Closing Inventory | 610,000 | 13.55 | 8,262,886 | |
| (7,00,000-90000) | ||||
| COGS | 90,000 | 13.55 | $ 1,219,114 | |
| Weighted Average cost = Total cost / Total quantity of goods | ||||
| = 94,82,000/7,00,000 = $ 13.55 | ||||
|
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