Question

Consider the following information for Maynor Company, which uses a periodic inventory system:

	Transaction	Units		Unit Cost			Total Cost
January 1	Beginning Inventory	15		$	65		$	975
March 28	Purchase	25			71			1,775
August 22	Purchase	30			75			2,250
October 14	Purchase	35			81			2,835
Goods Available for Sale		105					$	7,835

The company sold 35 units on May 1 and 30 units on October 28.

Required:

Calculate the company's ending inventory and cost of goods sold using the each of following inventory costing methods.

1. FIFO
2. LIFO
3. Weighted Average

Answer 1

DATA TABLE: Under FIFO: Units Rate $65 Amount $975 [15 units x $65] Ending inventory of 40 units shall consist of 35 units from Oct. 14's purchase and balance 5 units from Aug. 22's purchase: $71 $75 Beg. Bal. Purchases: On Mar. 28 On Aug. 22 On Oct. 14 Available for sale Units sold Ending inventory $1,775 $2,250 $2,835 $7,835 [25 units x $71] [30 units x $75] [35 units x $81] $81 105 -65 40 From Aug. 22 purchase From Oct. 14 purchase Cost of Ending inventory Available for sale Cost of Goods Sold $375 [5 units x $75] $2,835 [35 units x $81] $3,210 $7,835 [Ref: Data Table] $4,625 $7835 - $3210] [105-65] Available for sale - Dollar value Available for sale - Units Weighted Average cost per unit $7,835 [Ref: Data Table] 105 [Ref: Data Table] $74.619 [$7835 / 105 units]

Under LIFO: Under Weighted Average Method: Ending inventory of 40 units shall consist of 40 units from entire lot. So, Ending inventory of 40 units shall consist of 15 units from beginning inventory and bal. 25 units from Mar. 28's purchase: From Beg. Bal. From Mar. 28 purchase Cost of Ending inventory Available for sale Cost of Goods Sold $975 [15 units x $65] $1,775 [25 units x $71] $2,750 $7,835 [Ref: Data Table] $5,085 ($7835 - $2750] Weighted Average cost per unit # of units in ending inventory Cost of Ending inventory Available for sale Cost of Goods Sold $74.619 [As calculated below the Data table] 40 $2,984.76 or $2,985 [40 units x $74.619] $7,835.00 [Ref: Data Table] $4,850.24 or $4,850 [$7835.00 - $2984.76]