Question

# Mitchell Company’s record of transactions for the month of June was as follows. Purchases: Date                 Units         &nbs

Mitchell Company’s record of transactions for the month of June was as follows.

Purchases:
Date                 Units               Unit Cost
June 1              600       @         3.00€
4                        1,500    @         3.04
8                        800       @         3.20
13                     1,200     @        3.25
21                     700        @        3.30
29                     500        @        3.13
-------
5,300

Sales:
Date              Units                Unit Cost
June 3           500       @          5.00€
9                    1,300     @          5.00
11                  600        @          5.50
23                  1,200     @          5.50
27                  900        @          6.00
----------
4,500

Instructions

(a) Assuming that periodic inventory records are kept, compute the cost of goods sold and ending inventory at June 30 using (1) FIFO and (2) average cost.

a) Periodic Inventory system

FIFO:

Cost of goods sold    //       Ending Inventory

Average cost:

Cost of Goods sold      //     Ending inventory

(b) Assuming that perpetual inventory records are kept in both units and dollars, determine the Cost of goods sold and ending inventory at June 30 using (1) FIFO and (2) moving average cost.

b) Perpetual Inventory system

FIFO method:

Cost of goods sold    //    Ending Inventory

Average cost:

Cost of goods sold    //    Ending inventory

1

FIFO Periodic
Computation of COGS

COGS = OPENING STOCK + PURCHASE - CLOSING STOCK

0 + 16695 - 2555 = 14140

 QTY UNIT PRICE TOTAL 600 3 1800 1500 3.04 4560 800 3.2 2560 1200 3.25 3900 700 3.3 2310 500 3.13 1565 TOTAL PURCHASE COST 16695

COMPUTATION OF ENDING INVENTORY

TOTAL UNITS PURCHASED - TOTAL UNITS SOLD

5300 - 4500 = 800

COST OF ENDING INVENTORY

500 * 3.13 = 1565

300 * 3.3 = 990

TOTAL COST OF ENDING INVENTORY = 2555

AVERAGE COST

TOTAL COST OF ENDING INVENTORY

TOTAL COST OF PURCHASE / NUMBER UNITS PURCHASED

16695 / 5300 = 3.15

COST OF ENDING INVENTORY = 800 * 3.15

= 2520

COGS = 16695 - 2520

= 14175

2,

PERPECTUAL METHOD

For FIFO, the periodic and perpetual methods yield the same answers. The answers to the FIFO perpetual
method are the same as the answers to the FIFO periodic method

COGS = 14140

ENDING INVENTORY = 2555

MOVING AVERAGE METHOD

For the moving average method, after each purchase it is necessary to calculate a new average cost per
unit.

COGS

 QTY AVERAGE COST DURING SALE TOTAL 500 3 1500 1300 3.09 4017 600 3.09 1854 1200 3.23 3876 900 3.23 2907 TOTAL 14154

ENDING INVENTORY

Calculation average cost for ending inventory

500 * 3.13 = 1565

300 * 3.23 = 969

1565 + 969 = 2534

average cost = 2534/800

= 3.16

Ending inventory = 800 * 3.16

= 2528