Question

Styles Chris's Widgets made the following purchases of inventory during the month of September. Total costs Cost per unit #of units Date of Purchase purchased $1 $100 5 September 7 September 10 September 17 September 24 September 29 September 100 $1.50 $2 $2.5 $3 200 300 300 150 300 750 100 300 150 $4 $600 Total Units 1000 $4 Purchased Complete the chart above 1. What would be the COGS using LIFO if 500 units are sold? 500x $4= $2,000 2. What would be the COGS dSing FIFO if 500 units are sold? 500x $1- $500 3. What would be the COGS using Weighted Average if 500 units are sold. 4. Assume that you sold the 500 units at a costs of $10 per unit. Figure the net profit for each sales in questions 9, 10, & 11? Question 5 Income COGS Net Profit IFO FIFO Weighted Average Deskta hp

Answer 1

Answer 1)

Calculation of cost of goods sold under LIFO Method

LIFO Method: Under LIFO method cost of goods sold is calculated assuming that the units of inventory which are latest bought will be sold first and moving backwards. In the given question, out of the 500 units sold, under LIFO method, 150 units will be from the units purchased on 29^th September at $ 4.00 per unit, 100 units will be from the units purchased on 24^th September at $ 3.00 per unit and balance 250 units will be from the units purchased on 17^th September at $ 2.50 per unit.

Date	Number of Units	Cost per Unit (in $)	Total Cost (In $)
17' September	250	2.50	625
24' September	100	3.00	300
29' September	150	4.00	600
Total	500		1,525

Therefore the cost of 500 units sold under LIFO method is $ 1,525.

Answer 2)

Calculation of cost of goods sold under FIFO Method

FIFO Method: Under FIFO method cost of goods sold is calculated assuming that the units of inventory which are first bought will be sold first and so on. In the given question, out of the 500 units sold, under FIFO method, 100 units will be from the units purchased on 5^th September at $ 1.00 per unit, 200 units will be from the units purchased on 7^th September at $ 1.50 per unit, 150 units will be from the units purchased on 10^th September at $ 2.00 per unit and balance 50 units will be from the units purchased on 17^th September at $ 2.50 per unit.

Date	Number of Units	Cost per Unit (in $)	Total Cost (In $)
5' September	100	1.00	100
7' September	200	1.50	300
10' September	150	2.00	300
17' September	50	2.50	125
Total	500		825

Therefore the cost of 500 units sold under FIFO method is $ 825.

Answer 3)

Calculation of cost of goods sold under Weighted Average Method

Weighted Average Method: Under weighted average method, cost of goods sold is calculated by multiplying the number of units sold with the weighted average cost. The weighted average cost is calculated by dividing the aggregate cost of beginning inventory and all units purchased during the period by the total number of units in beginning inventory and units purchased during the period.

Cost of Goods sold = Number of units sold X Weighted average cost per unit

                                  = 500 units X $ 2.35 per unit

                                  = $ 1,175              

Therefore the cost of 500 units sold under Weighted Average method is $ 1,175.

Calculation of Weighted Average cost

Date of Purchase	Number of Units	Cost per Unit (in $)	Total Cost (In $)
5' September	100	1.00	100
7' September	200	1.50	300
10' September	150	2.00	300
17' September	300	2.50	750
24' September	100	3.00	300
29' September	150	4.00	600
Total	1000		2,350

Weighted average cost = (Total cost of units in beginning inventory and purchased during the year/ Total number of units in beginning inventory and purchased during the year)

                                                      = $ 2,350/ 1,000 units

                                                      = $ 2.35 per unit

Therefore the weighted average cost is $ 2.35 per unit

Answer 4)

Calculation of Net profit

Method	Income	Cost of Goods Sold	Net Profit
LIFO	$ 5,000	$ 1,525	$ 3,475
FIFO	$ 5,000	$ 825	$ 4,175
Weighted Average	$ 5,000	$ 1,175	$ 3,825

Therefore the Net profit under LIFO Method is $ 3,475, FIFO method is $ 4,175 and under weighted average method is $ 3,825.

Working Notes:

Sales = Number of units sold X selling price per unit

          = 500 units X $ 10.00 per unit

        = $ 5,000