E6-7 Jeters Company reports the following for the month of June Date Explanation
ID: 2535787 • Letter: E
Question
E6-7 Jeters Company reports the following for the month of June Date Explanation Units Unit Cost Total Cost 120 370 200 230 600 2,220 1,400 S5 une 1 12 23 30 Inventory Purchase Purchase Inventory (a) Compute the cost of the ending inventory and the cost of goods sold under (1) FIFO, (2) LIFO, and (3) average-cost. (Round average unit cost to three decimal (b) Which costing method gives the highest ending inventory? The highest cost of goods (c) How do the average-cost values for ending inventory and cost of goods sold relate to (d) Explain why the average cost is not $6. places.) sold? Why? ending inventory and cost of goods sold for FIFO and LIFO?Explanation / Answer
A) compute inventory cost under FIFO, LIFO AND AVERAGE COST
Inventory cost under FIFO
120
370
$5
$6
$6000
$2220
120
370
200
$5
$6
$7
$600
$2220
$1400
120
110
$5
$6
$600
$660
260
200
$6
$7
$1560
$1400
Note: if issue time then priority given for first buy f goods that way on JUN 30th issue of material then first priority given to JUN 1st material if not sufficient then given to JUN 12 TH material also.
Under LIFO method
120
370
$5
$6
$600
$2220
120
370
200
$5
$6
$7
$600
$2220
$1400
200
30
$7
$6
$1400
$180
120
340
$5
$6
$600
$2040
Note: under LIFO method we will priority given to which earlier buy material then this on will dispactched. its suitable for grossary and liquor base products.
UNDER AVERAGE COST METHOD
$4220
Note: 1.how can get 6.12 like total cost / total no.of units ($4220 / 690)
2. 690 units minus 230 units then get 460 units.
B) Highest ending inventory are under FIFO 460 UNITS , under LIFO 460 UNITS and finally average cost method 460 units, so highest ending inventory is in same of all methods
then coming to highest cost of goods sold under FIFO $2960, LIFO $2640, $ 2812, then finally highest cost of goods sold is under FIFO method.
C) Under AVERAGE COST METHOD, FIFO, LIFO
Ending inventory formula = begining inventory units + purchases made during the month in units - sold of inventory in units
cost of goods sold = begining inventory cost + purchases made during the month of value - sold inventory cost
average cost per unit = total cost / total units
D) AVERAGE COST PER UNIT IS 6.12 NOT FOR 6.00
because of on JUNE 30 th total cost is $2812 and remaining inventory is 460 units so
average cost per unit is = $2812 / 460 = $6.12
PURCHASES ISSUES BALANCE DATE PARTICULARS UNITS UNIT RATE TOTAL UNITS UNIT RATE TOTAL UNITS units rate total JUN 1ST Opening balance 120 $5 $600 ----- ----- ----- 120 $5 $6000 JUN12 PURCHASE 370 $6 $2220 ----- ----- -----120
370
$5
$6
$6000
$2220
JUN 23 PURCHASE 200 $7 $1400 ----- ----- ----120
370
200
$5
$6
$7
$600
$2220
$1400
JUN 30 ISSUE ----- ---- ----120
110
$5
$6
$600
$660
260
200
$6
$7
$1560
$1400
TOTAL INVENTORY COST ---- ----- ---- ---- ---- ---- 460 ---- $2960Related Questions
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