Shown below is activity for one of the products of a Local
Shop:
January 1 balance, 540 units @ $50 $27,000 | |
Purchases: | |
January 10: | 540 units @ $55 |
January 20: | 1,020 units @ $56 |
Sales: | |
January 12: | 910 units |
January 28: | 790 units |
Required:
Compute the January 31 ending inventory and cost of goods sold for
January, assuming the shop uses FIFO.
Since nothing is specified, whether perpetual or periodical inventory method, i am going to do both. Please take notice of it.
FIFO, First in first out
Perpetual Inventory system.
Cost of goods sold =
Jan 12 sales = [540 units * $50] + [(910 - 540)units * $55] = $27,000 + $20,350 = $47,350
Jan 20 sales = [170 units * $55] + [(790 - 170)units * $56] = $9,350 + $34,720 = $44,070
Total cost of goods sold = $91,420
Ending Inventory=
(1020 units - 620 units) * $56 = $22,400.
.
.
Periodic inventory system.
Cost of goods sold = (540 units * $50) + (540 units * $55) + (620 units * $56) = $91,420
Ending Inventory = 400 units * $56 = $22,400
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