Question

The units of an item available for sale during the year were as follows:

Jan. 1
Inventory
9 units at $39
$351
Aug. 13
Purchase
9 units at $41
369
Nov. 30
6 units at $42
252
Available for sale
24 units
There are 7 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost usin
first-in, first-out (FIFO) method; (b) last-in, first-out (LIFO) method; and (c) weighted average cost method (round per-unit cost to two decimal
your final answer to the nearest whole dollar).
Purchase
a. First-in, first-out (FIFO)
b.
Last-in, first-out (LIFO)
c. Weighted average cost
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M
$972
41 X
Check My Work
a. When the FIFO method is used, costs are included in cost of goods sold in the order in which they were purchased.
b. When the LIFO method is used, the cost of the units sold is the cost of the most recent purchases.
c. The average cost method is sometimes called the weighted average method. The average cost method uses the average unit cost for dete
cost of goods sold and the ending inventory.

Answer 1

Answer: a. First-in, first-out (FIFO) method:

Under FIFO, the first units purchased are assumed to be the first units sold.

9 units were sold at $39 each for a total cost of $351

9 units were sold at $41 each for a total cost of $369

6 units were sold at $42 each for a total cost of $252

So the total cost of goods sold is $351 + $369 + $252 = $972

The 7 units remaining in inventory at the end of the year were purchased at $41 each, so their cost is 7*41 = $287

b. Last-in, first-out (LIFO) method:

Under LIFO, the most recent units purchased are assumed to be the first units sold.

6 units were sold at $42 each for a total cost of $252

9 units were sold at $41 each for a total cost of $369

9 units were sold at $39 each for a total cost of $351

So the total cost of goods sold is $252 + $369 + $351 = $972

The 7 units remaining in inventory at the end of the year were purchased at $39 each, so their cost is 7*39 = $273

c. Weighted average cost method:

Under the weighted average cost method, the average cost of all the units is used to determine the cost of goods sold and ending inventory.

The total cost of the units available for sale is $351 + $369 + $252 = $972 and the total number of units available for sale is 24. So, the average cost per unit is $972 / 24 = $40.50

The cost of goods sold is $40.50 * 24 = $970.

The cost of the units remaining in inventory at the end of the year is $40.50 * 7 = $283.50

Note: The final answers were rounded to the nearest whole dollar.

Explanation: