Question

Oahu Kiki tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each month, as if it uses a periodic inventory system. Assume Oahu Kiki’s records show the following for the month of January. Sales totaled 240 units.

Date Units Unit Cost Total Cost
Beginning Inventory January 1 120 $ 80 $ 9,600
Purchase January 15 380 $90 $34,200
Purchase January 24 200 $110 $22,000

Calculate the cost of ending inventory and cost of goods sold using the (a) FIFO, (b) LIFO, and (c) weighted average cost methods.

Cost of Ending Inventory Cost of Goods. Sold
FIFO __________________. _______________
LIFO __________________. _______________
Weighted Average Cost __________________. _______________

Answer 1

The cost of ending inventory and COGS for Oahu Kiki were calculated using FIFO, LIFO, and weighted average cost methods. FIFO results in an ending inventory of $27,600 and COGS of $32,800. LIFO leads to an ending inventory of $9,600 and COGS of $25,600, while the weighted average method yields an ending inventory of $43,240 and COGS of $22,560.

Step-by-step explanation:

Calculation of Inventory Costing

The question involves calculating the cost of ending inventory and the cost of goods sold (COGS) for Oahu Kiki using different inventory costing methods, which include First-In, First-Out (FIFO), Last-In, First-Out (LIFO), and the weighted average cost method. Here are the step-by-step calculations:

FIFO (First-In, First-Out)

Sales: 240 units

Ending Inventory: The last items purchased will be in ending inventory. So, (120 units at $80) + (120 units at $90) = $16,800 + $10,800 = $27,600

COGS: The earliest items purchased will be sold first. So, the remaining 120 units at $90 + the 120 units at $110 = $10,800 + $22,000 = $32,800

LIFO (Last-In, First-Out)

Ending Inventory: The first items purchased will be in ending inventory. So, 120 units at $80 = $9,600

COGS: The latest items purchased will be sold first. So, (200 units at $110) + (40 units at $90) = $22,000 + $3,600 = $25,600

Weighted Average Cost

Total Units Purchased: 120 + 380 + 200 = 700 units

Total Cost: $9,600 + $34,200 + $22,000 = $65,800

Weighted Average Unit Cost: $65,800 / 700 = $94 per unit

Ending Inventory: 460 units at $94 = $43,240

COGS: 240 units at $94 = $22,560

Answer 2

To calculate the cost of ending inventory and cost of goods sold using the FIFO, LIFO, and weighted average cost methods, we need to allocate the costs of the inventory purchases and beginning inventory to the units sold and the ending inventory.

Using the FIFO method, we assume that the first units purchased are the first ones sold, and the ending inventory consists of the most recent purchases.

Date Units Unit Cost Total Cost
Beginning Inventory January 1 120 $ 80 $ 9,600
Purchase January 15 380 $90 $34,200
Purchase January 24 200 $110 $22,000

Total 700 $66,800

(a) FIFO:
The units sold would be allocated based on the first purchases made, as follows:

120 units from beginning inventory at $80 per unit = $9,600
100 units from January 15 purchase at $90 per unit = $9,000
20 units from January 24 purchase at $110 per unit = $2,200

Total cost of goods sold = $20,800

The cost of ending inventory would be allocated based on the most recent purchases, as follows:

260 units from January 24 purchase at $110 per unit = $28,600

(b) LIFO:
The units sold would be allocated based on the most recent purchases made, as follows:

200 units from January 24 purchase at $110 per unit = $22,000
40 units from January 15 purchase at $90 per unit = $3,600

Total cost of goods sold = $25,600

The cost of ending inventory would be allocated based on the earliest purchases, as follows:

120 units from beginning inventory at $80 per unit = $9,600
280 units from January 15 and 24 purchases at $90 per unit = $25,200

Total cost of ending inventory = $34,800

(c) Weighted Average Cost:
The weighted average cost per unit is calculated by dividing the total cost of inventory by the total number of units, as follows:

Total cost of inventory = $66,800
Total number of units = 700
Weighted average cost per unit = $66,800 / 700 = $95.43

The units sold and the cost of ending inventory would be allocated based on this weighted average cost per unit, as follows:

Units sold = 240 units
Cost of goods sold = 240 units x $95.43 per unit = $22,943.20

Ending inventory = 460 units
Cost of ending inventory = 460 units x $95.43 per unit = $43,897.80

Therefore, the cost of ending inventory and cost of goods sold using the FIFO, LIFO, and weighted average cost methods are:

Cost of Ending Inventory Cost of Goods. Sold
FIFO $28,600 $20,800
LIFO $34,800 $25,600
Weighted Average Cost $43,897.80 $22,943.20