Causwell Company began 2016 with 14,000 units of inventory on hand, The cost of

Question

Causwell Company began 2016 with 14,000 units of inventory on hand, The cost of each unit was $4.00. During 2016 an additional 34,000 units were purchased at a single unit cost, and 24000 units remained on hand at the end of 2016 (24,000 units therefore were sold during 2016). Causwell uses a periodic inventory system. Cost of goods sold for 2016. applying the average cost method, is $136,800. The company is interested in determining what cost of goods sold would have been if the FIFO or LIFO methods were used. Required: 1. Determine the cost of goods sold for 2016 using the FIFO method. (Hint: Determine the cost per unit of 2016 purchases.] FIFO cost of goods sold 2. Determine the cost of goods sold for 2016 using the LIFO method. (Do not round intermediate calculations.)

Explanation / Answer

Cost of Goods Sold 136800 No of units sold 24000 Cost of goods Sold per unit 5.7 Weighted Average cost of 48000 units (48000 x 48000) 273600 Less: Beginning Inventory at cost (14000 x 4) 56000 Purchase Cost of 34000 units 217600 Purchase cost per unit 6.4 Question 1. Cost of Goods Sold uning FIFO: 14000 units egining Inventory (14000 x $4) 56000 10000 units from current purchase 64000 FIFO cost of goods sold 120000 Question 2 Cost of Goods Sold uning Lifo: 24000 units at Current purchase price 153600 0 units from current purchase 0 LIFO cost of goods sold 153600

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