Question

Causwell Company began 2018 with 17,000 units of inventory on hand. The cost of each unit was $5.00. During 2018 an additional 35,000 units were purchased at a single unit cost, and 27,000 units remained on hand at the end of 2018 (25,000 units therefore were sold during 2018). Causwell uses a periodic inventory system. Cost of goods sold for 2018, applying the average cost method, is $142,500. The company is interested in determining what cost of goods sold would have been if the FIFO or LIFO methods were used.

Required:
1. Determine the cost of goods sold for 2018 using the FIFO method. [Hint: Determine the cost per unit of 2018 purchases.]
2. Determine the cost of goods sold for 2018 using the LIFO method. (Do not round intermediate calculations.)

Answer 1

	Determine the cost per unit of 2018 purchases
	sales in 2018	25000
	Cost of goods sold	$142,500
	Average cost per unit	$5.7
	Total cost of stock (17000+35000) units will be @ $5.70	$296,400
	Beginning units 17000 total cost @ $5	85000
	Remaining cost for 35000 units (296,400-85000)	$211,400
	Purchase cost per unit of 35000 units	$6.04
1	Determine the cost of goods sold for 2018 using the FIFO method
	First 17000 units @ $5	$85,000
	Next 8000 units @ $6.04	$48,320
	Total cost of goods sold under FIFO	$133,320
2	Determine the cost of goods sold for 2018 using the LIFO method.
	25000 units @ 6.04	$151,000