Samuelson and Messenger (S&M) began 2013 with 250 units of its one product. Thes

Question

Samuelson and Messenger (S&M) began 2013 with 250 units of its one product. These units were purchased near the end of 2012 for $24 each. During the month of January, 125 units were purchased on January 8 for $27 each and another 250 units were purchased on January 19 for $29 each. Sales of 170 units and 130 units were made on January 10 and January 25, respectively. There were 325 units on hand at the end of the month. S&M uses a periodic inventory system.

Calculate ending inventory and cost of goods sold for January using (1) FIFO, and (2) average cost.

Calculate ending inventory and cost of goods sold for January using (1) FIFO, and (2) average cost.

Explanation / Answer

FIFO method:

Ending inventory = 75*27+250*29 = $ 9,275

Cost of goods sold = 250*24 + 50*27 = $ 7,350

Average cost method:

Average cost per unit = (250*24+125*27+250*29)/(250+125+250) = 26.6

Ending inventory = 325*26.6 = $ 8,645

Cost of goods sold = (170+130)*26.6 = $ 7,980

Hope this helped ! Let me know in case of any queries.

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