Naab Inc. uses a periodic inventory system. Its records show the following for t

Question

Naab Inc. uses a periodic inventory system. Its records show the following for the month of May, in which 160 units were sold. Date Explanation Units Unit Cost Total Cost May 1 Inventory 62 $18 $1,116 May 15 Purchase 51 21 1,071 May 24 Purchase 82 23 1,886 Total 195 $4,073 Calculate the ending inventory at May 31 using the (a) FIFO, (b) average-cost, and (c) LIFO methods. (Round all answers to 0 decimal places, e.g. 2,555. For average cost computations round the per unit cost to 3 decimal places, e.g. 2.550.) FIFO $ Average-cost $ LIFO $ Calculate the amount allocated to cost of goods sold under each method. FIFO $ Average-cost $ LIFO $

Explanation / Answer

Periodic is a lot easier than perpetual. Date Explanation Units Unit Cost Total Cost May 1 Inventory 30 $9 $270 May 15 Purchase 25 10 250 May 24 Purchase 40 11 440 Total 95 $960 Calculate the ending inventory at May 31 using the average-cost You purchased 95 units for a total of $960, so the average cost is $960/95 = $10.105 each So cost of ending inventory = 17 units x $10.105 = $171.79 COGS = $960 - $171.79 = $788.21. You can also get COGS = 78 units sold x $10.105 = $788.19. The difference of two cents is due to the rounding up to 3 decimal places for the unit cost.

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