Question

Metlock Marine Products began the year with 11 units of marine floats at a cost of $12 each. During the year, it made the following purchases: May 5, 32 units at $17; July 16, 16 units at $20; and December 7,21 units at $24. Assume there are 24 units on hand at the end of the period. Metlock uses the periodic system. (a) Determine the cost of goods sold under FIFO. Cost of good sold Determine the cost of goods sold under LIFO.

Answer 1

The student's inquiry relates to determining the cost of goods sold using FIFO and LIFO methods for Metlock Marine Products, not the examples of AAA Aquarium Co. and Doggies Paradise Inc. FIFO accounts for the oldest inventory first, while LIFO uses the most recent costs.

Step-by-step explanation:

The student is asking how to determine the cost of goods sold (COGS) under both FIFO (First-In, First-Out) and LIFO (Last-In, First-Out) inventory costing methods using a periodic system. Unfortunately, the provided information does not match the question. Instead, it discusses the profit-maximization problem for AAA Aquarium Co. and Doggies Paradise Inc. which are separate examples dealing with calculating different levels of output, total revenue, total cost, marginal revenue, and marginal cost.

For the proper FIFO and LIFO question, under FIFO, the oldest inventory items are sold first, so the cost of goods sold is based on the cost of the oldest items in inventory. Conversely, under LIFO, the most recently purchased items are considered sold first, and the COGS is based on the latest purchase costs.

To calculate COGS for the Metlock example, assuming FIFO, the first 11 units from the beginning inventory (at $12 each) would be used, followed by units from the May 5 purchase, and so on, until you account for all units sold. Under LIFO, you would start with the costs of the 21 units from the December 7 purchase (at $24 each), then the units from the July 16 purchase, and so on, in reverse chronological order.

Answer 2

The cost of goods sold (COGS) under FIFO for Metlock Marine Products is $1,308, while under LIFO it is $1,147, calculated based on the respective inventory accounting methods and the specific purchases and units remaining.

Step-by-step explanation:

Calculation of Cost of Goods Sold Under FIFO and LIFO for Metlock Marine Products

Metlock Marine Products began the year with 11 units of marine floats for $12 each. During the year, the following purchases were made: 32 units at $17 on May 5, 16 units at $20 on July 16, and 21 units at $24 on December 7. With 24 units on hand at the end of the year and using a periodic system, we need to calculate the cost of goods sold (COGS) under both the First-In, First-Out (FIFO) and Last-In, First-Out (LIFO) methods.

FIFO Method

Under FIFO, the oldest inventory costs are assigned to COGS first. The calculation will be as follows:

1. 11 units at $12 (beginning inventory) = $132
2. 32 units at $17 (May 5 purchase) = $544
3. 16 units at $20 (July 16 purchase) = $320
4. Since only 56 units were sold and we have accounted for 43 units already, the remaining 13 units sold come from the December 7 purchase. 13 units at $24 = $312

Adding these together, the COGS under FIFO would be $1,308.

LIFO Method

Under LIFO, the latest inventory costs are used first. The calculation will be as follows:

1. 21 units at $24 (December 7 purchase) = $504
2. 16 units at $20 (July 16 purchase) = $320
3. Since we need to account for 56 units sold and we have accounted for 37 units, the remaining 19 units sold are from the May 5 purchase. 19 units at $17 = $323

The total COGS under LIFO would be $1,147.