FIFO vs. average cost method a) ?b) Calculate the cost of goods sold and ending
ID: 2390945 • Letter: F
Question
FIFO vs. average cost method
a)
?b) Calculate the cost of goods sold and ending inventory using AVERAGE COST METHOD.
Cost of goods sold = $ ?
Ending inventory = $ ?
Flounder Limited uses a perpetual inventory system. The inventory records show the following data for its first month of operations:Date Explanation Units Unit Cost Total Cost Balance in Units Aug. 2 Purchases 237 $71 $16,827 237 3 Purchases 524 105 55,020 761 10 Sales (307 ) 454 15 Purchases 938 122 114,436 1,392 25 Sales (319 ) 1,073
Explanation / Answer
A)FiFo Method used
Cost of goods sold=begging inventory+purchase-ending inventory
Beggining inventory=0
Purchases=16827$+55020$+114436$=186283$
Ending inventory= (135×105)+(938×122)=128611$
Cost of goods sold=0+186283$-128611$=57672$
Ending inventory= 128611$
B) Average cost Method
Average Rate= Total Cost of inventory/total numberof units of inventory
Total cost of inventory=16827$+55020$+114436$=186283$
Number of units of inventory= 237+524+938=1699
Average Rate = 186283$/1699=109.64$
Cost of goods sold=( begging number of units+Purchases-Ending number ofunits)×Average Rate
=(0+1699-1073)×109.64$ =68634.64$
ending inventory= ending number of units inventory× average rate
=1073×109.64$=117643.72$
Sl.no No.of units Rate value(units×rate) 1 135 105 14175 2 938 122 114436 Total 1073 128611$Related Questions
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