Question

Refer to the information in Problem 5-1A and assume the periodic inventory system is used. Required

1. Compute cost of goods available for sale and the number of units available for sale.

2. Compute the number of units in ending inventory.

3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. (Round all amounts to cents.)

4. Compute gross profit earned by the company for each of the four costing methods in part 3.

Short answer

FIFO	$14,800
LIFO	$12,700
Weighted Average	$13,640
Specific Identification	$14,060

Step-by-step solution

Definition of Average Cost

The average cost can be defined as the per-unit cost calculated by the business entity, considering the total cost incurred in the acquisition and the total units acquired.

Cost assigned to ending inventory

(a) FIFO

Particular	Units	X	Per unit	=	Total cost
March 25	200	X	$62	=	$12,400
March 18	40	X	$60	=	$2,400
Total	$14,800

(b) LIFO:

Particular	Units	X	Per unit	=	Total cost
March 1	100	X	$50	=	$5,000
March 5	140	X	$55	=	$7,700
Total	$12,700

(c) Weighted Average:

$\begin{array}{rcl}\mathrm{Ending}\mathrm{inventory}& =& \frac{\mathrm{Total}\mathrm{cost}\mathrm{of}\mathrm{goods}\mathrm{available}\mathrm{for}\mathrm{sale}}{\mathrm{Total}\mathrm{units}}\times \mathrm{Ending}\mathrm{inventory}\\ & =& \frac{\$46,600}{820}\times 240\\ & =& \$13,640\end{array}$

(d) Specific identification:

Particular	Units	x	Per unit Cost	=	Total cost
Beginning inventory	20	x	$50	=	$1,000
March 5	60	x	$55	=	3,300
March 18	80	x	$60	=	4,800
March 25	80	x	$62	=	4,960
Total	$14,060