This Quiz: 100 pts poe 21 of 28 This Question: 7 pts Cranwell Company\'s invento

Question

This Quiz: 100 pts poe 21 of 28 This Question: 7 pts Cranwell Company's inventory mecords for a particular development program show the following at May 31 Click the lcon to view the accounting reconds) 31, 10 of these programs are on hand Specific unit cost, with ive $150 units and ive $180 units stil on hand alt the n b. Average c e. First-in, d. Last- in,isou 2 which method produces the highent oost o goods wol? which method produces the lowest cost of goods sold? What causes the diffenence in cost of goods sold Requirement 1. Compute cost of goods sold and ending inventory using each of the following four inventory mehods Degin by entering the nunber of uns sols and nuniber of units in ending inventory Then caloulate cost of goods soild and anding invantony using (a) speofic unit cost, then () average coet, then (c) FIFO, and fnalily t) LIFO (Round the ave (d LIFO FIFO Cost of goods sold Ending inventory Requirement 2.Whichmethod produces the highhest cos ofgoods sole? Which metod produces the lowest cos ofgoods sok? What causes the ofference in co of goods sold Which method produces the highes cos of goods sold Which method produces the lowes cost of goods so Enter any number in metds and then continue to the ext qtion 8 2 8

Explanation / Answer

cost of goods available for sale= 900+604+2240=3744

units available for sale :6+4+14=24

1)specific identification method :

Ending inventory :[5*150]+[5*160]

          = 750+ 800

          = $ 1550

cost of goods sold =cost of goods available for sale-ending inventory

         = 3744-1550

       = $ 2194

b)Average cost :cost of units available for sale /units available for sale

= 3744/24=$ 156

ending inventory = 10 *156 =$ 1560

cost of goods sold = 3744-1560= 2184

c)FIFO:under FIFO units acquired first are sold first so ending inventory are left from last purchase

Ending inventory : [10 units*160] = 1600

cost of goods sold = 3744-1600= 2144

d)LIFO : units acquired last are sold first so ending units are left from initial purchase

Ending inventory : [6*150]+[4*151]

         = 900+ 604

            = $ 1504

cost of goods sold = 3744-1504= 2240

2)Last in first out (LIFO)method produces highest cost of goods sold of $ 2240 whereas First in first out (FIFO)method produces lowest cost of goods sold. of $ 2144

The difference is so because under LIFO units are sold at latest purchase price which is highest whereas in FIFO units are sold out of lowest prices

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