Exerdise 21-7 The following information is taken from the accounting records of

Question

Exerdise 21-7 The following information is taken from the accounting records of Gildred Mfg. Corp Use of unit costs for the current year: n the valuation of inventory NUMBER AVERAGE TOTAL OF UNITS UNIT COST COST $120 120,000 125 1,250,000 $1,370,000 Goods available for sale . ....11,000 A physical inventory taken at year-end indicates 800 units of finished goods on hand. The company uses the FIFO (first-in, first-out) method to value its inventories Determine the cost of the 800 unit ending inventory of finished goods. b Compute the cost of goods sold during the current year. Instructions a

Explanation / Answer

Units available for sales = 11,000 units

Units in Ending inventory = 800 units.

Units sold = 11,000 units - 800 units. = 10,200 units

Note : Under FIFO method , out of 10,200 units sold , 1,000 units are from beginning inventory of finished goods & remaining 9,200 units are from finished goods manufactured during the month.

Thus ending inventory of finished goods of 800 units are from finished goods manufactured during the month.

Answer a ) Cost of ending inventory of finished goods = 800 units * $125 = $100,000

Answer b ) Cost of goods sold = (1,000 units * $120) + (9,200 units * $125)

= $120,000 + $1,150,000= $1,270,000

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