ome of the information found on a detail inventory card for Pharoah Inc. for the

Question

ome of the information found on a detail inventory card for Pharoah Inc. for the first month of operations is as follows.

Received
Date No. of Units Unit Cost Issued,No. of Units Balance, No. of Units
January 2 1,600 $5.10 1,600
7 1,100 500
10 1,000 5.44 1,500
13 900 600
18 1,400 5.61 700 1,300
20 1,100 200
23 1,700 5.78 1,900
26 1,200 700
28 2,000 5.95 2,700
31 1,700 1,000

Calculate average-cost per unit. (Round answer to 2 decimal places, e.g. 2.76.)

Average-cost per unit
$_________________

(1)
FIFO

(2)
LIFO

(3)
Average-cost

(1)
FIFO

(2)
LIFO

(3)
Average-cost

From these data compute the ending inventory on each of the following bases. Assume that perpetual inventory records are kept in units only. (1) First-in, first-out (FIFO). (2) Last-in, first-out (LIFO). (3) Average-cost. (Round final answers to 0 decimal places, e.g. 6,548.)

(1)
FIFO

(2)
LIFO

(3)
Average-cost

Ending Inventory $

$

$

Explanation / Answer

FIFO / LIFO / Aversge cost in first option where record are kept only in units.

FIFO

ending inventory will be in purchase of Jan 28, and cost of ending inventory will be

1000 x 5.95 = 5950

LIFO

Ending inventory in this case will be from purchase of Jan 2 purchase, and cost of ending inventory will be

1000 x 5.10 = 5100

Average Cost

Average cost of purchase per unit

= (1600 x 5.10) +(1000 x 5.44) + (1400 x 5.61) + (1700 x 5.78) + (2000 x 5.95) / (1600 + 1000 + 1400 + 1700 + 2000)

= (8160 + 5440 + 7854 +9826 + 11900 ) / 7700

= 43180 / 7700 = 5.6078 per unit

Average cost per unit = 5.6078 per unit

cost of ending inventory = 1000 x 5.6078 = $ 5608

Second option when computation is on each withdrawal

FIFO

500@5.10

1000@5.44

200@5.61

1700@5.78

700@5.78

2000@5.95

So cost of ending inventory is 1000 x 5.95 = $5950

LIFO

500@5.10

1000@5.44

500@5.10

100@5.44

500@5.10

100@5.44

700@5.61

200@5.10

1700@5.78

200@5.10

500@5.78

200@5.10

500@5.78

2000@5.95

200@5.10

500@5.78

300@5.95

Cost of ending inventory will be

(200 x 5.10) + (500 x 5.78) + (300 x 5.95) = $5695

Av Cost

Average cost method will be the same as calculated before in option one so as per this methos cost on ending inventory will be $5608/- ( as calculated in option 1)

So above is the solution to the problem.

FIFO LIFO AV. COST Ending Inventory ($) 5950 5100 5608

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