Exercise 6-8 Moath Company reports the following for the month of June. Units Un

Question

Exercise 6-8 Moath Company reports the following for the month of June. Units Unit Cost Total Cost June 1 Inventory 560 $5 $ 2,800 12 Purchase 1,120 7 7,840 23 Purchase 840 10 8,400 30 Inventory 280 Calulate Weighted Average Unit Cost. (Round answer to 2 decimal places, e.g. 15.25.) Weighted Average Unit Cost $ Compute the cost of the ending inventory and the cost of goods sold using the average-cost method. (Round answers to 0 decimal places, e.g. 1,250.) The ending inventory $ The cost of goods sold $ LINK TO TEXT Will the results in (a) be higher or lower than the results under FIFO and LIFO? Ending inventory is than FIFO $ and than LIFO $. In contrast, cost of goods sold is than FIFO $ and than LIFO $.

Explanation / Answer

Ans.1 Weighted average cost method: Date Units Unit cost Total cost 1-Jun 560 5 2800 12-Jun 1120 7 7840 23-Jun 840 10 8400 2520 19040 Weighted average unit cost   =   Total cost / Total units 19040 / 2520 7.55555 or 7.56 Cost of Ending inventory = Weighted average unit cost * Ending inventory units 7.5555 * 280 2116 Units sold = Units available for sale - Ending inventory units 2520 - 280 2240 Cost of goods sold = Weighted average unit cost * Units sold 7.5555 * 2240 16924 Ans.2 FIFO: (Periodic) Ending inventory Date Units Unit cost Total cost 23-Jun 280 10 2800 Cost of goods sold: Date Units Unit cost Total cost 1-Jun 560 5 2800 12-Jun 1120 7 7840 23-Jun 560 10 5600 2240 16240 *While using the FIFO the Ending inventory will be higher and the cost of goods sold will be lower than using the weighted average cost method. LIFO: (Periodic) Ending inventory Date Units Unit cost Total cost 1-Jun 280 5 1400 Cost of goods sold: Date Units Unit cost Total cost 23-Jun 840 10 8400 12-Jun 1120 7 7840 1-Jun 280 5 1400 2240 17640 *While using the FIFO the Ending inventory will be lower and the cost of goods sold will be higher than using the weighted average cost method.

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