Rogers Products uses a periodic inventory system. The company\'s records show th

Question

Rogers Products uses a periodic inventory system. The company's records show the beginning inventory of PI 14 oil filters on January I and the purchases of t its item uring the current year to be as follows: A physical count indicates 200 units in inventory at year-end. Determine the cost of the ending inventory on the basis of each of the following methods of inventory valuation. (Remember to use periodic inventory costing procedures.) Which of the above methods (if any) results in the same ending inventory valuation uni boif periodic and perpetual costing procedures? Explain.

Explanation / Answer

Answer:

a) Average cost per unit = $4,380/1,100 = $3.982

Cost of ending inventory = 200 units * $3.982 = $796.4

b)

FIFO method = Ending inventory represents cost of most recent purchase

= 190 units *$5 + 10 units *$4 = $990

c) LIFO method = Ending inventory represents cost of most earlier purchase

= 90 units *$3 + 110 units*$3.5 = $655

d) Average cost method results in same ending inventory under both periodic and perpetual procedure. Because under both the method the average of all puchase costs are computed which remains same under any of the costing procedure.

Units Rate (In$) Total(in$) Jan-01 Beginning inventory 90 3 270 Feb-23 Purchase 120 3.5 420 Apr-20 Purchase 300 3.8 1140 May-04 Purchase 400 4 1600 Nov-30 Purchase 190 5 950 Totals 1100 4380

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