Question

*Exercise 8-11 Culver Company's record of transactions for the month of April was as follows. Purchases April 1 (balance on hand) 750 @ $5.00 1,875 @ 5.07 1,000 @ 5.36 1,500 @ 5.56 875 @ 5.66 625 @ 5.86 6,625 Sales April 3 625 @ $11.00 9 1,750 @ 11.00 11 750 @ 12.00 23 1,500 @ 12.00 27 1,125 @ 13.00 5,750 Assuming that periodic inventory records are kept in units only, calculate the average-cost per unit. (Round answer to 2 decimal places, e.g. 2.76.) Average-cost per unit per unit Assuming that periodic inventory records are kept in units only, compute the inventory at April 30 using LIFO and average-cost. (Round answer to o decimal places, e.g. 2,760.) LIFO Average-cost

Answer 1

1.

Average cost per unit
	Qty(i)	Rate(ii)	Amount(iii=i*ii)
1-Apr	750	5	3,750.00
4-Apr	1875	5.07	9,506.25
8-Apr	1000	5.36	5,360.00
13-Apr	1500	5.56	8,340.00
21-Apr	875	5.66	4,952.50
29-Apr	625	5.86	3,662.50
Total	6625		35,571.25
Average cost= Total Amount/ Total Qty
	35571.25/6625
	5.37

Inventory Purchased					Goods sold
	Qty(i)	Rate(ii)	Amount(iii=i*ii)			Qty(i)	Rate(ii)	Amount(iii=i*ii)
1-Apr	750	5	3,750.00		3-Apr	625	11	6875
4-Apr	1875	5.07	9,506.25		9-Apr	1750	11	19250
8-Apr	1000	5.36	5,360.00		11-Apr	750	12	9000
13-Apr	1500	5.56	8,340.00		23-Apr	1500	12	18000
21-Apr	875	5.66	4,952.50		27-Apr	1125	13	14625
29-Apr	625	5.86	3,662.50			5750		67750
Total	6625		35,571.25
			Closing Inventory	Rate	Amount
LIFO	6625-5750=875	1-Apr	750	5	3,750.00
	875-750=125	4-Apr	125	5.07	633.75
					4,383.75
As per LIFO	4,383.75
Average	6625-5750=875
	Average cost per unit=5.37
	Closing Inventory=875*5.37=4698.75
	4,698.75

Inventory Purchased					Goods sold
	Qty(i)	Rate(ii)	Amount(iii=i*ii)			Qty(i)	Rate(ii)	Amount(iii=i*ii)
1-Apr	750	5	3,750.00		3-Apr	625	11	6875
4-Apr	1875	5.07	9,506.25		9-Apr	1750	11	19250
8-Apr	1000	5.36	5,360.00		11-Apr	750	12	9000
13-Apr	1500	5.56	8,340.00		23-Apr	1500	12	18000
21-Apr	875	5.66	4,952.50		27-Apr	1125	13	14625
29-Apr	625	5.86	3,662.50			5750		67750
Total	6625		35,571.25
			Closing Inventory	Rate	Amount
LIFO	6625-5750=875	29-Apr	750	5	3,750.00
	875-750=125	21-Apr	125	5.07	633.75
					4,383.75
As per FIFO	4,383.75
			Closing Inventory	Rate	Amount
FIFO	6625-5750=875	29-Apr	625	5.86	3,662.50
	875-625=250	21-Apr	250	5.66	1,415.00
					5,077.50
As per LIFO	5,077.50

COGS= Opening Inventory+Purchase- Closing Inventory
As per FIFO
Opening Inventory	3,750.00
Closing Inventory	5,077.50
Purchases	31,821.25
	3750+31821.25-5077.50=30,493.75
	30,493.75

In an inflationary period FIFO method will show the highest net income since the value of closing inventory is highest (5,077.50) in this method, leading to increase in net profit.