Problem 6-3A Ziad Company had a beginning inventory on January 1 of 90 units of
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Question
Problem 6-3A Ziad Company had a beginning inventory on January 1 of 90 units of Product 4-18-15 at a cost of $20 per unit. During the year, the following purchases were made. Mar. 15 240 units at $23 Sept. 4 210 units at $26 July 20 150 units t $24 Dec. 2 60 units $29 600 units were sold. Ziad Company uses a periodic inventory system. Determine the cost of goods available for sale. The cost of goods available for sale LINK TO TEXT VIDEO: SIMILAR PROBLEM Calculate average cost per unit. (Round answer to 2 decimal places, e.g. 2.23.) Average cost per unit VIDEO: SIMILAR PROBLEMExplanation / Answer
Opening Inventory Total = 90units x $20 = $1800
Total Purchases made during the year = (240 x 23) + (150 x 24) + (210 x 26 ) + (60 x 29)
= $5520+$3600+$5460+$1740
= $16320
Cost of good available for sale = Opening Inventory + Purchase During the year
= $1800 + $16320
= $18120
Average Cost per Unit = Total Cost / quantity
= $18120 / 750
= $24.16
The Ending Inventory (In case of FIFO) = inventory at the begining and thereafter purchase was sold first so 600 units includes (90+240+150+120) , and ending inventory is (90 units x 26 + 60 units x 29) = $4080
Cost of good sold (FIFO) = 90 units x 20 + 240 units x 23 + 150 units x 24 + 120 units x 26
= $1800+$5520+$3600+$3120
= $14040
Average cost (FIFO) = COGS / Total quantity
= $14040 / 600
= $23.40
The Ending Inventory (In case of LIFO) = In last in first out last purchase or inventory was sold first so 600 includes ( 60+210+150+180) and ending inventory is (60 units x 23 + 90 units x 20) = $3180
Cost of good sold (LIFO) = 60 units x 29 + 210 units x 26 + 150 units x 24 + 180 units x 23
= $1740 + $5460 + $3600 + $4140
= $14940
Average Cost (LIFO) = COGS / Total quanity
= $14940 / 600
= $24.90
FIFO Results highest inventory amount, $4080
LIFO Produces the highest cost of good sold, $14940.
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