Question 6 (11 Marks) Hansen Corporation uses the perpetual inventory system and
ID: 2394243 • Letter: Q
Question
Question 6 (11 Marks)
Hansen Corporation uses the perpetual inventory system and had the following information available:
Units Unit Cost Total Cost
Jan
1
Beginning inventory
15
$4.00
$ 60
20
Purchase
60
4.40
264
21
Sale
65
-
-
Jul
25
Purchase
30
4.20
126
Oct
20
Purchase
45
4.80
216
Nov
15
Sale
75
-
-
Instructions
Answer the following independent questions and show calculations supporting your answers:
a) Assume that the company uses the FIFO cost method. The cost of goods sold for the Jan 21 sale was $ ________
b) Assume that the company uses the average cost method. The cost of goods sold for the Jan 21 sale was $ _____________ (Use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.)
c) Assume that the company uses the average cost method. The value of the inventory after the Nov 15 sale was $ _________________ . (Use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.)
d) Assume that the company uses the FIFO cost method. The value of the inventory after the Oct 20 purchase is $_____________ .
Jan
1
Beginning inventory
15
$4.00
$ 60
20
Purchase
60
4.40
264
21
Sale
65
-
-
Jul
25
Purchase
30
4.20
126
Oct
20
Purchase
45
4.80
216
Nov
15
Sale
75
-
-
Explanation / Answer
a) COGS for the Jan 21 Sale (FIFO) = 15 units * $4 + 50 units * $4.40 = $280
b) COGS for the Jan 21 sale (Average Cost ) = Cost of units /No. of Units = (264+60)/75 = $4.32
$4.32*65 = $280.80
c) Cost of Inventroy after Nov 15 Sale ( Average cost ) = Number of Units left * Average Cost
(15+60-65+30+45-75) * 4.80 = $48
d) Value of Inventory after Oct 20 Purchase ( FIFO) =
Number of units left from Jan 20 lot after sale of Jan 21 = 10 units . Therefore Cost of these 10 units = 10*4.4 = $ 44
Cost of units from 25 july lot = 30*4.2 =$ 126
Cost of units from 20 oct lot = 45*4.8 = $ 216
Total Cost = 44+126+216 = $ 386
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