Question

Benjamin Buttons company had the following inventory transactions for the month of September. Beginning Inventory 400 units @ $5.60 per unit = $2,240.00 Purchase #1 480 units @ $5.75 per unit = $2,760.00 Purchase #2 520 units @ $6.00 per unit = $3,120.00 Purchase #3 550 units @ $6.20 per unit = $3,410.00 Purchase #4 560 units @ $6.25 per unit = $3,500.00 Total 2,510 $15,030.00 Less: Sold 1,315 Ending Inventory 1,195 Required: 1. Calculate the value of the Cost of Goods sold under LIFO 2. Calculate the value of the Ending Inventory under LIFO 3. Calculate the value of the Cost of Goods Sold under FIFO 4. Calculate the value of the Ending Inventory under FIFO. 5. What is the value of the a) COGS and b) Ending Inventory under the average cost method?

Answer 1

Sr no.	Purchases
Beginning	400 U * 5.6 = 2240
1	480 U * 5.75 = 2760
2	520 U * 6 = 3120
3	550 U * 6.2 = 3410
4	560 U * 6.25 = 3500
Total	2510 units for 15030

Here, U stand for units

1)

LIFO
	Units	Rate ($)	Amount ($)
Sold 1315 units	560	6.25	3500
	550	6.2	3410
	205	6	1230
	( 1315 - 560 - 550 )
Total	1315		8140
Ending Inventory	1195		6890
	( 2510 -1315 )		( 15030 - 8140 )

2)

FIFO
	Units	Rate ($)	Amount ($)
Sold 1315 units	400	5.6	2240
	480	5.75	2760
	435	6	2610
Total	1315		7610
Ending Inventory	1195		7420
			(15030-7610)

3)

Average cost :

Average cost = Total cost / Number of units

Average cost = 15030 / 2510

Average cost = 5.98 per unit

Cost of goods sold = 1315 units * $ 5.98 = $ 7874

Ending inventory = 1195 units

Ending Inventory ( Value ) = 15030 - 7874 = $ 7156