Question

Suppose a technology company's inventory records for a particular computer chip indicate the following at October 31:

oct.	1	Beginning inventory	5 units @	$160	=	$ 800
	8	Purchase	4 units @	160	=	640
	15	Purchase	11 units @	170	=	1870
	26	Purchase	5 units @	180	=	900

1. The physical count of inventory at october 31 indicates that 8 units of inventory are on hand.

Requirements:

Compute ending inventory and cost of goods sold using each of the following methods, using the periodic inventory system. Round all amounts to the nearest dollar.

1. Specific unit cost, assuming four $160 units and four $170 units are on hand

2. Weighted-average cost

3. First in,first out cost

Answer 1

Computation of ending inventory and cost of goods sold using the periodic inventory system:

1)

Ending inventory under specific unit cost = ($160*4) + ($170*4) = 640+680 = 1320

Cost of goods sold under specific unit cost = ($160*5) + ($170*7) +($180*5) = 800 + 1190 + 900 = 2890

2.

Weigheted Average cost per unit = Total Cost / Total units

=($800 +640 + 1870 +900 )/5+4+11+5= 4210 / 25 = 168.4

Ending inventory under Weigheted Average cost = $168.4*8 = 1347.2

Cost of goods sold under Weigheted Average cost = $168.4*17 = 2862.8

3.

Ending inventory under First in First out cost = ($180*5) + ($170*3) = 900+510 = 1410

Cost of goods sold under First in First out cost = ($160*9) + ($170*8) = 1440+ 1360 = 2800