Question

Ferris Company began 2018 with 9,000 units of its principal product. The cost of each unit is $4. Merchandise transactions for the month of January 2018 are as follows:

	Purchases
Date of Purchase	Units		Unit Cost*			Total Cost
Jan. 10	6,000		$	5			$	30,000
Jan. 18	9,000			6				54,000
Totals	15,000							84,000

*Includes purchase price and cost of freight.

Sales
Date of Sale	Units
Jan. 5	5,000
Jan. 12	3,000
Jan. 20	6,000
Total	14,000

10,000 units were on hand at the end of the month.

Required:
Calculate January's ending inventory and cost of goods sold for the month using each of the following alternatives:
1. FIFO, periodic system.
2. LIFO, periodic system.
3. LIFO, perpetual system.
4. Average cost, periodic system.
5. Average cost, perpetual system.

Answer 1

Total Cost = $84,000 + 9,000 x $4 = $120,000

Total Unit = 9,000 + 15,000 = 24,000

Average Cost = $120,000 / 24,000 = $5 per unit

1. FIFO, periodic system:

Ending inventory = 9,000 x $6 + 1,000 x $5 = $59,000

Cost of goods sold = $120,000 - $59,000 = $61,000

3. LIFO, perpetual system:

Ending inventory = 4,000 x $4 + 3,000 x $5 + 3,000 x $6= $49,000

Cost of goods sold = $120,000 - $49,000 = $71,000

2. LIFO, periodic system:

Ending inventory = 9,000 x $4 + 1,000 x $5 = $41,000

Cost of goods sold = $120,000 - $41,000 = $79,000

4. Average cost, periodic system:

Ending inventory = 10,000 x $5 = $50,000

Cost of goods sold = $120,000 - $50,000 = $70,000