Question

Woodson Company sells many products. Gizmo is one of its popular items. Below is an analysis of the inventory purchases and sales of Gizmo for the month of March. Woodson Company uses the perpetual inventory system.

Purchases

Sales

Units

Unit Cost

Units

Selling Price/Unit

3/1	Beginning inventory	100	$40
3/3	Purchase	60	$50

3/4

Sales

60

$80

3/10

Purchase

200

$55

3/16	Sales			90	$90
3/19	Sales			70	$90
3/25	Sales			60	$90

3/30

Purchase

40

$60

Instructions
(a) Using the FIFO assumption, calculate the amount charged to cost of goods sold for March. (Show computations)
(b) Using the LIFO assumption, calculate the amount assigned to the inventory on hand on March 31. (Show computations)

Answer 1

(a) FIFO method :
Date	Purchase			Sale ( at cost )			Balance
	Units	Unit cost	Total cost	Units	Unit cost	Total cost	Units	Unit cost	Total cost
3/1							100	40	4000
3/3	60	50	3000				100	40	4000
							60	50	3000
3/4				60	40	2400	40	40	1600
							60	50	3000
3/10	200	55	11000				40	40	1600
							60	50	3000
							200	55	11000
3/16				40	40	1600	10	50	500
				50	50	2500	200	55	11000
3/19				10	50	500	140	55	7700
				60	55	3300
3/25				60	55	3300	80	55	4400
3/30	40	60	2400				80	55	4400
							40	60	2400

Amount charged to cost of goods sold for March = 2400 + 1600 + 2500 + 500 + 3300 + 3300

13600

(b) LIFO method :
Date	Purchase			Sale ( at cost )			Balance
	Units	Unit cost	Total cost	Units	Unit cost	Total cost	Units	Unit cost	Total cost
3/1							100	40	4000
3/3	60	50	3000				100	40	4000
							60	50	3000
3/4				60	50	3000	100	40	4000
3/10	200	55	11000				100	40	4000
							200	55	11000
3/16				90	55	4950	100	40	4000
							110	55	6050
3/19				70	55	3850	100	40	4000
							40	55	2200
3/25				40	55	2200	80	40	3200
				20	40	800
3/30	40	60	2400				80	40	3200
							40	60	2400

Amount assigned to the inventory on hand on March 31 = 3200 + 2400

5600