Periodic Inventory by Three Methods The units of an item available for sale duri

Question

Periodic Inventory by Three Methods

The units of an item available for sale during the year were as follows:

Jan 1 Inventory 9 units @ $360
Feb 17 Purchase 18 units @ $414
July 21 Purchase 21 units @ $468
Nov 23 Purchase 12 units @ $495


There are 16 units of the item in the physical inventory at December 31. The periodic inventory system is used

a. Determine the inventory cost by the first-in, first-out method.
b. Determine the inventory cost by the last-in, first-out method.
c. Determine the inventory cost by the average cost method.

Explanation / Answer

Remember: inventory cost is what is left over at the end of the period, i.e. the cost of the 16 units of physical inventory remaining.

a.
12 * 495 = 5940
4 * 468 = 1872
TOTAL: 7812

b.
9 * 360 = 3240
7 * 414 = 2898
TOTAL: 6138

c.
9 * 360 = 3240
18 * 414 = 7452
21 * 468 = 9828
12 * 495 = 5940
Total cost 26460 (3240+7452+9828+5940)
Total units 60 (9+18+21+12)
Average cost = 26460/60 = 441/unit
16*441 = 7056

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