Question

On January 1, a company begins the year with 4,000 units of inventory with a unit cost of $25. The company makes purchases at the end of each month based on expected units to be sold in the following month relative to current units on hand.

Using the FIFO assumption, calculate cost of goods sold and the cost of ending inventory. (Hint: This calculation is made easier by using the Running Sum columns in Monthly Purchases)

12/31: Cumulative Units Actually Sold: 40,712

12/31: Units on hand On hand: 4,048

Cumulative Sales Revenue

12/31: $1,451,605

Answer 1

The cost of goods sold and cost of ending inventory under FIFO cannot be calculated without the monthly purchase details of inventory. The beginning inventory value is 4,000 units at $25 each, but we need additional purchase information to proceed.

Step-by-step explanation:

To calculate the cost of goods sold (COGS) and cost of ending inventory under the First-In, First-Out (FIFO) method, consider the following: The company starts with 4,000 units at $25 each. Throughout the year, it will sell and replenish inventory based on sales. By the end of the year, it sold 40,712 units and has 4,048 units on hand.

To give a complete answer, we need detailed information about the purchases made during the year. However, the FIFO method implies that the oldest inventory (the 4,000 units at $25/unit) would be sold first. The cost of goods sold would be the sum of all units sold at their respective purchase costs. With the data given, we do not have the purchase cost information for additional inventory bought throughout the year. Without this data, we cannot calculate COGS or ending inventory cost accurately.

For revenues, the total sales revenue is given as $1,451,605. Without the selling price per unit, it's not possible to calculate total revenues based on unit sales directly.

Answer 2

Without the necessary monthly purchase data, it is impossible to calculate the cost of goods sold (COGS) and ending inventory using the FIFO method. The proper calculation requires a detailed record of each month's purchases to determine the costs of the sold inventory and the value of remaining stock.

Step-by-step explanation:

Calculation of Cost of Goods Sold and Ending Inventory using FIFO

The question involves calculating cost of goods sold (COGS) and the cost of ending inventory using the First-In, First-Out (FIFO) method for inventory accounting. Under FIFO, it is assumed that the oldest inventory items are sold first. To calculate the COGS and ending inventory, we start with the initial inventory and account for purchases and sales throughout the year.

However, the question as presented lacks specific monthly purchase information, which would be necessary to accurately execute these calculations. Therefore, I will provide a general approach based on the initial data provided.

Initial inventory: 4,000 units at $25 each
Total initial inventory value = 4,000 units * $25/unit = $100,000

On December 31, the cumulative units sold are given as 40,712, and the remaining units on hand are 4,048. If no additional units were purchased throughout the year (which is unlikely in practice), the COGS would be:

COGS = (Initial inventory units - Ending inventory units) * Cost per unit
COGS = (4,000 units - 4,048 units) * $25/unit
However, this calculation is incorrect since we cannot have negative COGS or sell more units than the starting inventory without additional purchases.

Without monthly purchase data, we cannot accurately calculate the COGS or the ending inventory value using FIFO. The correct approach requires detailed monthly purchase data to track the cost of items sold and the remaining inventory costs as the year progresses.