Question

Can you show step by step in how to get FIFO and FIFO and weight

ave. its cost of goods and ending inventory

Answer 1

FIFO involves using the oldest costs first for COGS and the newest costs for ending inventory, while Weighted Average Cost calculates an average cost per unit by summing the total costs and dividing by total units, then applying that average to COGS and ending inventory.

Step-by-step explanation:

To calculate the cost of goods sold (COGS) and ending inventory using the First-In, First-Out (FIFO) and Weighted Average Cost (WAC) methods, follow these steps:

• FIFO: List your inventory in the order it was acquired. Sell or use the oldest costs first when calculating COGS. The ending inventory is valued at the most recent costs.
• Weighted Average Cost: Multiply the cost of each item by the quantity on hand to get the total cost for the item. Sum the total costs and divide by the total units available to find the average cost per unit. Apply this average cost to the units sold for COGS and to the units remaining for ending inventory.

For example, if you have 10 widgets bought at $5 (older) and 10 widgets bought at $7 (newer) and you sold 15 widgets, under FIFO, the COGS would be (10*$5) + (5*$7), and the ending inventory would be (5*$7). Under WAC, the COGS is calculated by averaging the costs: (($5*10)+($7*10))/20 = $6 average cost per unit, then COGS for 15 units is 15*$6, and the ending inventory is 5*$6.