6. Periodic Inventory System and Inventory Costing Methods In chronological orde

Question

6. Periodic Inventory System and Inventory Costing Methods

In chronological order, the inventory, purchases, and sales of a single product for a recent month are as follows:

Using the periodic inventory system, compute the cost of ending inventory, cost of goods sold, and gross margin. Use the average-cost, FIFO, and LIFO inventory costing methods. Round unit costs to the nearest cent and round the final answers to the nearest dollar.

Explain the differences in gross margin produced by the three methods.

Units   Amount per Unit June 1 Beginning inventory 150 $30 4 Purchase 400   33 12 Purchase 800   36 16 Sale 1,300   60 24 Purchase 300   39

Explanation / Answer

Units Per unit cost Amount Beginning inventory 150 30 4500 4 june purchase 400 33 13200 12 june purchase 800 36 28800 24 june purchase 300 39 11700 Total cost of goods available for sale 1650 58200 1 Average cost per unit 35.27 (58200/1650) Ending inventory 350 Average cost per unit 35.27 Total inventory cost 12345 Cost of goods available for sale 58200 Less Ending inventory 12345 Cost of goods sold 45855 2 FIFO Ending inventory Units Per unit cost Amount june 12 purchase 50 36 1800 june 24 purchase 300 39 11700 Total 350 13500 Cost of goods available for sale 58200 Less Ending inventory 13500 Cost of goods sold 44700 3 LIFO Ending inventory Units Per unit cost Amount June 1 inventory 150 30 4500 june 4 purchase 200 33 6600 Total 350 11100 Cost of goods available for sale 58200 Less Ending inventory 11100 Cost of goods sold 47100 Average FIFO LIFO Ending inventory 12345 13500 11100 Cost of goods sold 45855 44700 47100 Average FIFO LIFO Sales 78000 78000 78000 Cost of goods sold 45855 44700 47100 Gross margin 32145 33300 30900

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