Question

Cost Flow Methods

The following three identical units of Item LO3V are purchased during April:

	Item LO3V		Units		Cost
April 2	Purchase		1		$211
April 14	Purchase		1		212
April 28	Purchase		1		213
Total			3		$636
Average cost per unit					$212	($636 ÷ 3 units)

Assume that one unit is sold on April 30 for $288. Determine the gross profit for April and ending inventory on April 30 using the (a) first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) weighted average cost methods.

	Gross Profit	Ending Inventory
a. First-in, first-out (FIFO)	$	$
b. Last-in, first-out (LIFO)	$	$
c. Weighted average cost	$	$

Answer 1

A ) FIFO METHOD.

>> Gross profit = $ 288 - $ 211 = $ 77.

>> Ending Inventory = $ 212 + $ 213 = $ 425.

---------------------------------------------------------------------------------------------------

B ) LIFO Method.

>> Gross profit = $ 288 - $ 213 = $ 75.

>> Ending Inventory = $ 211 + $ 212 = $ 423.

------------------------------------------------------------------------------------------------------

C ) Weighted average cost.

>> Gross profit = $ 288 - $ 212 = $ 76.

>> Ending inventory = $ 212 * 2 = $ 424.