Answer:
a. FIFO - cost of goods sold is $7,484 while ending inventory $4,320
b. LIFO - cost of goods sold is $7,952 while ending inventory $3,852
c. Weighted average - cost of goods sold is $7,698.26 while ending inventory $4,105.74
Step-by-step explanation:
Considering the first in first out FIFO, Last in first out LIFO and weighted average methods of accounting for inventory. Given that the beginning inventory of chairs was 60 units at $25 per unit.
Given that during the year, two batch purchases were made at 58-unit purchase at $28 per unit; the second was a 196-unit purchase at $30 per unit while 270 chairs were sold.
Using FIFO,
Total number of chairs available for sale before 270 was sold
= 60 + 158 + 196
= 414 chairs
The 60 units at the beginning will be sold first, then the 158 units and the remainder from the 196 units purchased
The cost of the 270 items sold
= 60 * $25 + 158 * $28 + 52 * $30
= $7,484
Ending inventory (remaining from the 196 units purchased last)
= (196 - 52) * $30
= 144 *$30
= $4,320
Using LIFO
The cost of the 270 items sold
= 196 * $30 + 74 * $28
= $7,952
Ending inventory (remaining from the 158 units purchased and the 60 units available from the beginning)
= (60 * $25) + (158 - 74) *$28
= $1500 + $2352
= $3,852
Using weighted average
Weighted average cost of each unit
= (60 * $25 + 158 * $28 + 196 * $30)/(60 + 158 + 196)
= $11804/414
= $28.51207729
If 270 units were sold, cost of goods sold
= 270 * $28.51207729
= $7,698.26
Value of ending inventory
= (414 - 270) * $28.51207729
= $4,105.74