Steve Company was formed on December 1, 2010. The following information is avail

Question

Steve Company was formed on December 1, 2010. The following information is available from Steve's inventory record for Product X. Units Unit Cost January 1, 2011 (beginning inventory) 1,500 $19.00 Purchases: January 5, 2011 2,600 $20.00 January 25, 2011 2,400 $21.00 February 16, 2011 1,000 $22.00 March 15, 2011 2,300 $24.00 A physical inventory on March 31, 2011, shows 2,800 units on hand. Instructions Prepare schedules to compute the ending inventory at March 31, 2011, under each of the following inventory methods: (a) FIFO (b) LIFO (c) Weighted-average. Show supporting computations in good form Read more: http://www.justanswer.com/homework/3ez2z-steve-company-formed-december-1-2010-following.html#ixzz3upIZBYod

Explanation / Answer

Part A)

Under the FIFO method the units in inventory which have been purchased first will be sold first. Therefore, the ending inventory of 2,800 units will comprise of the most latest inventory from March 15 purchases and February 16 purchases. The cost of ending inventory under FIFO can be calculated with the use of following table:

__________

Part B)

Under the LIFO method the units in inventory which have been purchased last will be sold first. Therefore, the ending inventory of 2,800 units will comprise of units from the beginning inventory and January 5 purchases. The cost of ending inventory under LIFO can be calculated with the use of following table:

__________

Part C)

Under weighted average method, we will have to calculated the weighted average cost per unit to determine the total cost of ending inventory. The computation of total weighted average cost has been shown with the use of following table:

Weighted Average Cost Per Unit = Total Weighted Average Cost/Total Units = 208,100/9,800 = $21.23

Ending Inventory Cost = 2,800*21.23 = $59,457 (answer)

Steve Company COMPUTATION OF INVENTORY FOR PRODUCT X UNDER FIFO INVENTORY METHOD March 31, 2010 Units (A) Unit Cost (B) Total Cost (A*B) March 15, 2010 2,300 $24.00 $55,200 February 16, 2010 500 $22.00 $11,000 March 31, 2010 Inventory 2,800 $66,200 (answer)

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