Question

In its first month of operations, Cisler Company made three purchases of merchandise in the following sequence: (1) 300 units at $6, (2) 400 units at $8, and (3) 500 units at $9. Assuming there are 200 units on hand at the end of the period.

Calculate average unit cost. (Round answers to 3 decimal places, e.g. 5.125.) Average unit cost $

Compute the cost of the ending inventory under the average-cost method, assuming there are 550 units on hand at the end of the period.

Answer 1

Solution and Explanation:

a) FIFO (First in first out method)

Of the 200 units remaining on hand, all 200 are from the last purchase.

the Ending inventory using the first in first out method

200 at the rate of $9 = $ 1,800

b) LIFO (Last in first out method)

Of the 200 units remaining on hand, all 200 are from the first purchase.

the Ending Inventory using the last in first out method

200 at the rate of $6 = $ 1,200