The units of an item available for sale during the year were as follows: Jan. 1 Inventory 30 units at $112 Mar. 10 Purchase 70 units at $122 Aug. 30 Purchase 30 units at $128 Dec. 12 Purchase 70 units at $132 There are 60 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the ending inventory cost and the cost of goods sold by three methods. Round interim calculations to one decimal and final answers to the nearest whole dollar. Cost of Ending Inventory and Cost of Goods Sold Inventory Method Ending Inventory Cost of Goods Sold First-in, first-out (FIFO) $ 10,520 $ 14,460 Last-in, first-out (LIFO) 4,640 20,340 Weighted average cost 7,494 17,486

FIFO : Ending Inventory = $7,920, Cost of Goods Sold = $17,060

LIFO : Ending Inventory = $7,020, Cost of Goods Sold = $17,960

AVCO : Ending Inventory = $7,494, Cost of Goods Sold = $17,486

Explanation:

FIFO

FIFO method assumes that the first goods received by the business will be the first ones to be delivered to the final customer.

Ending Inventory

Ending Inventory = physical units left × earliest price

                            =  60 units × $132

                            =  $7,920

Cost of Goods Sold

Cost of Goods Sold  : 30 units × $112  = $3,360

                                    70 units × $122 = $8,540

                                    30 units × $128 = $3,840

                                    10 units × $132  = $1,320

                                    Total                  = $17,060

LIFO

FIFO method assumes that the last last goods purchased are the first ones to be issued to the final customer.

Ending Inventory

Ending Inventory  :     30 units × $112  = $3,360

                                    30 units × $122 = $3,660                                  

                                    Total                  = $7,020

Cost of Goods Sold

Cost of Goods Sold  : 70 units × $132  = $9,240

                                    30 units × $128 = $3,840

                                    40 units × $122 = $4,880

                                    Total                  = $17,960

Weighted Average Cost Method (AVCO)

Recalculates the cost of goods held each time new delivery of goods is received. Issues are then priced out at this weighted average cost.

Unit Cost = Total Costs / Total units

                = (30 units × $112 + 70 units × $122 + 30 units × $128 + 70 units × $132) / 200

                = $124.90

Ending Inventory

Ending Inventory = units at hand × weighted unit price

                             = 60 units  × $124.90

                             = $7,494

Cost of Goods Sold

Cost of Goods Sold = units sold × weighted unit price

                                 = 140 units  × $124.90

                                 = $17,486

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