Causwell Company began 2018 with 17,000 units of inventory on hand. The cost of

ID: 2562819 • Letter: C

Question

Causwell Company began 2018 with 17,000 units of inventory on hand. The cost of each unit was $5.00. During 2018 an additional 35,000 units were purchased at a single unit cost, and 27,000 units remained on hand at the end of 2018 (25,000 units therefore were sold during 2018). Causwell uses a periodic inventory system. Cost of goods sold for 2018, applying the average cost method, is $142,500. 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 2018 using the FIFO method. [Hint: Determine the cost per unit of 2018 purchases.]
2. Determine the cost of goods sold for 2018 using the LIFO method. (Do not round intermediate calculations.)

Explanation / Answer

Determine the cost per unit of 2018 purchases

sales in 2018

25000

Cost of goods sold

$142,500

Average cost per unit

$5.7

Total cost of stock (17000+35000) units will be @ $5.70

$296,400

Beginning units 17000 total cost @ $5

85000

Remaining cost for 35000 units (296,400-85000)

$211,400

Purchase cost per unit of 35000 units

$6.04

Determine the cost of goods sold for 2018 using the FIFO method

First 17000 units @ $5

$85,000

Next 8000 units @ $6.04

$48,320

Total cost of goods sold under FIFO

$133,320

Determine the cost of goods sold for 2018 using the LIFO method.

25000 units @ 6.04

$151,000