Inventory by Three Methods; Cost of Merchandise Sold The units of an item availa

Question

Inventory by Three Methods;

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

Jan. 1 Inventory 40 units @ $92 each

Mar. 10 Purchase 40 units @ $104 each

Aug. 30 Purchase 20 units @ $108 each

Dec. 12 Purchase 100 units @ $114 each

There are 80 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost and the cost of merchandise sold by three methods, presenting your answers in the form below. Round the average cost per unit to the nearest cent and round your final answers to the nearest whole dollar.

  Cost                    

                                                      Merchandise             Merchandise

        Inventory Method                 Inventory                         Sold        

a.    FIFO..........................   

b.    LIFO.........................

c.    Average cost.........   

Explanation / Answer

Note 1: Merchandise Sold: 40 Units @ $ 92 + 40 Units @ $ 104 + 20 Units @ $ 108 + 20 Units @ $ 114.

Note 2: Merchandise Sold: 100 Units @ $ 114 + 20 Units @ $ 108.

Note 3: Total Units Purchased: 200, Total Cost: $ 21,400

             Average Cost/Unit: $ 21400 / 200 = $ 107 per Unit.

             Total Units Sold: 120 Number

            Merchandise Sold: 120 * 107 = $ 12, 840

Inventory Method Cost Merchandise inventory Merchandise Sold FIFO $ 9,120 (80 @114) $12,280 (Note 1) LIFO $ 7,840 (40 @92 and 40 @104) $ 13,560 (Note 2) Average Cost $ 8,560 (80 @ 107) $12,840 (Note 3)

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