Causwell Company began 2013 with 28,000 units of inventory on hand. The cost of

Question

Causwell Company began 2013 with 28,000 units of inventory on hand. The cost of each unit was $4. During 2013 an additional 48,000 units were purchased at a single unit cost, and 38,000 units remained on hand at the end of 2013 (38,000 units therefore were sold during 2013). Causwell uses a periodic inventory system. Cost of goods sold for 2013, applying the average cost method, is $174,800. 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 2013 using the FIFO method. [Hint: Determine the cost per unit of 2013 purchases.] 2. Determine the cost of goods sold for 2013 using the LIFO method.

Explanation / Answer

Average cost per unit 174800 / 38000 4.6 Avg Cost = total cost / total unit total cost (28000*4) + 48000*x Total Unit 28000 + 48000 76000 Avg Cost = total cost / total unit 4.6 So Total cost = 4.6 *76000 349600 Purchase cost for 48000 = 349600-112000 237600 Per unit cost    237600 / 48000 4.95 So Under FIFO Method Cost of goods sold 28000*4 + 10000*4.95 161500 Under LIFO Method Cost of goods sold 38000*4.95 188100

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