Question

Question 4

Blue Distribution markets CDs of the performing artist Marilynn. At the beginning of October, Blue had in beginning inventory 4,420 of Marilynn’s CDs with a unit cost of £2. During October, Blue made the following purchases of Marilynn’s CDs.

Oct. 3		6,630		@		£6		Oct. 19		8,840		@		£13
Oct. 9		12,155		@		£7		Oct. 25		4,420		@		£14

During October, 29,835 units were sold. Blue uses a periodic inventory system.

Determine (1) the ending inventory and (2) the cost of goods sold under the two assumed cost flow methods (FIFO and average-cost). (Round average unit cost to 4 decimal places, e.g. 25.1672 and final answers to 0 decimal places, e.g. 2,120.)

		FIFO		AVERAGE-COST
The ending inventory		£		£
The cost of goods sold		£		£

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and format. For detailed answer refer to the supporting sheet.

Answer 3 Firstly we have to calculate the cost of goods available for sale 4 = beginning inventory + purchases 5 = (4420*2)+(6630*6)+(12155*7)+(8840*13)+(4420*14) 6 = 310505 8 No. of units in ending inventory 9 = available for sale -sold 10 = (4420+6630+12155+8840+4420) - 29835 11 = 36465 - 29835 12 = 6630 units 14 Average cost per unit = total cost/ total units 15 = 310505/36465 16 = 8.5152 17 18 Now 19 Cost of ending inventory FIFO 20 = No. of units* cost as per FIFO 21 = (4420*14)+(2210*13) 22 = 90610 23

4 Cost of goods sold fifo == total cost of goods available for sale - ending inventory FIFO 5 = 310505-90610 6 = 219895 8 Cost of goods sold weighted average = no. of units sold* average cost 9 = 29835*8.5152 0 = 254050 2 Ending Inventory weighted average = no. of units in ending inventory * average cost 3 = 6630*8.5152 4 = 56455 6 Thus the final answer 3 The ending inventory 9 The cost of goods sold FIFO 90610 219895 Average Cost 56455 254050