Question

PROBLEM 6 - Cost flow assumptions Sandy Shutters has the following inventory information Nov 1 Inventory 5 units @ $5 8 Purchase 10 units @ $6 17 Purchase 15 units @ $7 Purchase 10 units @ $8 25 A physical count of merchandise inventory on November 30 reveals that there are 8 units on hand. Ending Inventory Instructions Assume a periodic inventory system is used. Answer the following independent questions and show computations supporting your answers. 1. Assume that the company uses the LIFO method. The value of the ending inventory at November 30 IS and the Cost of Goods Sold is $ 2. Assume that the company uses the average-Cost method. The value of the ending inventory on November 30 is and the Cost of Goods Sold is $_ 3. Assume that the company uses the FIFO method. The value of the ending inventory at November 30 is __and the Cost of Goods Sold is $_

Answer 1

	Unit	Unit cost	Total cost
Inventory	5	5	25
Purchase 1	10	6	60
Purchase 2	15	7	105
Purchase 3	10	8	80
Total	40		270

a) Ending inventory under LIFO = 8*8 = 64 : Cost of goods sold under LIFO = 270-64 = 206

b) Ending inventory under average cost = 270/40*8 = 54; Cost of goods sold under average cost = 270-54 = 216

c) Ending inventory under FIFO = 25+3*6 = 43; Cost of goods sold under FIFO = 270-43 = 227