Ziad Company had a beginning inventory on January 1 of 143 units of Product 4-18

Question

Ziad Company had a beginning inventory on January 1 of 143 units of Product 4-18-15 at a cost of $20 per unit. During the year, the following purchases were made.

950 units were sold. Ziad Company uses a periodic inventory system.

a) Determine the cost of goods available for sale.

b) Calculate average cost per unit.

c) Determine the ending inventory and the cost of goods sold under each of the assumed cost flow methods.

d) Which cost flow method results in the highest inventory amount for the balance sheet, and the highest cost of goods sold for the income statement?

Mar. 15 380 units at $23 Sept. 4 333 units at $26 July 20 238 units at $24 Dec. 2 95 units at $29

Explanation / Answer

Solution a:

Solution b:

Average cost per unit = Total Cost / Total Units = $28725 / 1189 = $24.159 (rounded to 3 decimal places)

Solution c:

Solution d:

FIFO method results in highest Invemtory amount i.e. $6,499

LIFO method results im highest cost of goods sold i.e. $23,657

Particulars Cost of goods available for sale Nos of units Unit Cost Cost of goods available for sale Beginning inventory 143 $20.00 $2,860 Purchases: 15-Mar 380 $23.00 $8,740 20-Jul 238 $24.00 $5,712 4-Sep 333 $26.00 $8,658 2-Dec 95 $29.00 $2,755 Total 1189 $28,725

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