Question

Shown below is the activity for one of the products of Random Creations: December 1 balance, 80 units @ $50

Date Event Number of Units Cost per Unit ($)

Dec/02 Purchase 100 5

Dec/05 Sale 110 N/A

Dec/10 Sale 50 N/A

Dec/18 Purchase 100 5.5

Calculate the CGS and End Inventory using:

• FIFO Perpetual
• Average Cost Periodic

Answer 1

Date	particulars	Pur. units	Rate of purchase	Sale units	Sale rate	COGS	Balance
Dec 1st	Opening balance ($50×80units						4000
Dec 2	purchase	100	5				4500
Dec 5	sale			110	(80 units × $50)=4000 (30units ×$5)=150	$4150	$350
Dec 10	sale			50	$5×50	$250	$100
Dec 18	purchase	100	5.5				$650
	Ending inventory as per FIFO						$650

In FIFO method goods sold applied first against oldest stock at old rate. Therefore,

Cost of goods sold = $4400

Ending inventory = $650

Average cost method

Purchase date	Units	Rate	Cost
Dec 1st Opening	80	50	4000
Dec. 2	100	5	500
Dec 18	100	5.5	550
Total	280		5050
Average rate= 5050÷ 280		18.04

Therefore

Cost of goods sold (COG)= 160 units × 18.04=2886

Ending inventory =280-160= 120 units × 18.04= 2164