Question

Sterling Sands Corporation had the following transactions during the month.

September 5                          Purchase                    65 units @$6 each

September 13                        Purchase                    55 units @$8 each

September 29                        Purchase                    44 units @$10 each

September 30                        Ending inventory 70 units

Determine the cost of the ending inventory using the following methods:

1. FIFO
2. LIFO
3. Average cost

Answer 1

a)

Date	Units	Unit cost	Total cost
Sept 13.	26	8	208
Sept 29	44	10	440
Total	70	18	$648

Cost of ending inventory as per FIFO = $648

b)

Date	Units	Unit cost	Total cost
Sept 5.	65	6	390
Sept 13	5	8	40
Total	70	14	$430

Cost of ending inventory as per LIFO = $430

c)

Date	Units	Unit cost	Total cost
Sept 5.	65	6	390
Sept 13	55	8	440
Sept 29.	44	10	440
Total	164	24	$1,270

Average cost per unit = Total cost/Total units

= 1,270/164

= $7.743902439

Cost of ending inventory as per average cost method = Average cost per unit x Ending inventory units

= 7.743902439 x 70

= $542 ( Rounded to nearest whole dollar)

Exact answer figure may be slightly differ due rounding off.

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