Question

1. Hogwarts had the following wand purchases for October: Date Transaction Wands Price 1-Oct Purchase 20 $ 5.00 4-Oct Purchase 15 $ 6.00 10-Oct Purchase 35 $ 7.00 12-Oct Sale 25 $ 10.00 For the above table, calculate COGS under LIFO, FIFO, and Weighted Average.

Answer 1

Ans:

1) LIFO -

Cost of goods sold:

25 wands sold on 12-Oct from purchases of 35 wands at $7 each made on 10-Oct.

Therefore, Cost of goods sold using LIFO = 25*7

Cost of goods sold = $175 (LIFO)

2) FIFO -

Cost of goods sold:

25 wands sold on 12-Oct first from purchases of 20 wands at $5 each and remaining 5 wands from 15 wands at $6 each made on 1-Oct and 4-Oct respectively.

Therefore, cost of goods sold using FIFO = (20 * $5) + (5 * $6)

Cost of goods sold = ($100 + $30)

Cost of goods sold= $130 (FIFO)

3) Weighted average-

Weighted average cost per unit:

= Total purchase cost/total wands purchased

Total purchase cost = (20 * $5)+(15 * $6)+(35 * $7)

Total purchase cost = ($100 + $90 + $245)

Total purchase cost = $435

Total wands purchased = (20 + 15 + 35)

Total wands purchased = 70

Weighted average cost per unit = $435/70

Weighted average cost per unit = $6.214

25 wands sold on 12-Oct using weighted average.

Therefore, cost of goods sold using weighted average=(25 * $6.214)

Cost of goods sold = $155.35 (Rounding off to nearest whole number)

Cost of goods sold = $155 (Weighted average)

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