Allocating procuct cost between cost of goods sold and ending inventory: multipl

Question

Allocating procuct cost between cost of goods sold and ending inventory: multiple purchases
Laird Company sells coffee makers uned in business offices. Its beinning inventory of coffee markers was 200 units at $45 per unit. During the year, Laird made two batch purchases of coffee makers. The fist was a 300-unit purchase at $50 per unit; the second was a 350-unit purchses at $52 per unit. During the period, Laird sold 800 coffee makers.
Determin the amount of product cost that be allocated to cost of goods sold and ending inventory, assuming that Laird use LIFO AND WEIGHTED AVERAGE.

Explanation / Answer

Laird’s beginning inventory was 200. They purchased 650 coffee makers and sold 800, so they have 50 left.

Beginning inventory = 200*45 = 9000.

Purchases = 300*50 + 350*52 = 33,200.

Beginning inventory + purchases = 42,200

1. FIFO means first in, first out, so the coffee makers in the ending inventory are part of the last ones in bought at $52 per unit.

Ending inventory = 50*52 = 2,600.

Cost of goods sold = 33,200 – 2,600 = 30,600.

2. LIFO means last in first, so the coffee makers in the ending inventory are part of the first ones in bought at $45.

Ending inventory = 50*45 = 2250.

Cost of goods sold = 33,200 – 2250 = 30,950.

3. Weighted average

Total cost/total units = 33,200/850 = 39.06 (rounded)

Ending inventory = 50*39.06 = 1952.94

Cost of Goods sold = 33,200 – 1952.94 = 31,247.06

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