Question

The question of beginning inventory for Midnight Supplies and data, i have attempted this problem and have not come up with the correct answer for the Weighted Average Cost of Goods sold? Every time I put the answer into Cengage`s box for the COGS it does not have a green check mark, only a pink box indicating that the answer is wrong.  Can you try to resolve the answer because I cannot find a solution to resolve this answer, all the FIFO, and LIFO are correct except for the Weighted Average COGS which is a minus to the Gross Profit.

Answer 1

The requirement is to calcualate the ending inventory and cost of goods sold for the three month period. Therefore we calculate the same taking the three months as a single period.

1. (a) Inventory as at March 31 11,250 units with a value of $1,010,625.00

(b) Cost of goods sold 125,250 units with a value of $10,891,875.00

Under FIFO the inventory will be valued at the last purchase prices.

Working:

  

FIFO
Date		Units	Price	Value
January
Jan.1	Inventory	7500	75	562500
Jan.10	Purchase	22500	85	1912500
Feb.10	Purchase	54000	87.5	4725000
Mar.5	Purchase	45000	89.5	4027500
Mar.25	Purchase	7500	90	675000
	Total inventory	136500		11902500
Jan.28	Sale	11250
Jan.30	Sale	3750
Feb.5	Sale	1500
Feb.16	Sale	27000
Feb.28	Sale	25500
Mar.14	Sale	30000
Mar.30	Sale	26250
	Total Sale	125250
Mar.31	Inventory	11250		1010625
	(7,500 @$90 + 3,750 @$89.50)
Jan. - Mar.	Cost of goods sold	125250		10891875

2. (a) Inventory as at March 31 11,250 units with a value of $881,250.00

(b) Cost of goods sold 125,250 units with a value of $11,021,250.00

Under LIFO the inventory will be valued at the first available inventory / purchase price.

3. (a) Inventory as at March 31 11,250 units with a value of $981,000.00

(b) Cost of goods sold 125,250 units with a value of $10,921,500.00

Under Weighted average method, the inventory will be valued at the weighted average price of the beginning inventory and the purchases during the period.

4.

	Sales	Cost of	Gross	Inventory
		goods sold	Profit
FIFO	19875000	10891875	8983125	1010625
LIFO	19875000	11021250	8853750	562500
Weighted average	19875000	10921500	8953500	981000

We can see that when the prices are rising , the gross prfit under FIFO will behigher than under LIFO since the ending inventory is valued at higher prices than under LIFO. When the prices are falling , the reverse will be the case.