Question

Seneca Co. began year 2017 with 6,500 units of product in its January 1 inventory costing \(35 each. It made successive purchases of its product in year 2017 as follows. The company uses a periodic inventory system. On December 31, 2017, a physical count reveals that 8,500 units of its product remain in inventory.

Jan 4	11,500 units @ \)33 each
May 18	13,400 units @ \(32 each
July 9	11,000 units @ \)29 each
Nov 21	7,600 units @ $27 each

Required

Compute the amounts assigned to the 2017 ending inventory and the cost of goods sold using (a) FIFO, (b) LIFO, and (c) weighted average. (Round all amounts to cents.)

Short answer

FIFO	$231,500
LIFO	$280,500
Weighted Average	$265,200

Step-by-step solution

Definition of Inventory Cost

The cost incurred for the acquisition, maintenance, holding, and administration of the inventory is known as inventory cost. All these costs are used to determine the amount of inventory held in the business.

Calculation of Cost Assigned to Ending Inventory and Cost of Goods Sold

(a) FIFO

Particular	Units	X	Per unit Cost	=	Total cost
Nov 21	7,600	X	$27	=	$205,200
July 9	900	X	$29	=	$26,100
Total					$231,300

(b) LIFO

Particular	Units	X	Per unit Cost	=	Total cost
Jan 4	8,500	X	$33	=	$280,500
Total					$280,500

(c) Weighted Average

$\begin{array}{rcl}\mathrm{Ending}\mathrm{Inventory}& =& \frac{\mathrm{Total}\mathrm{cost}\mathrm{of}\mathrm{goods}\mathrm{available}\mathrm{for}\mathrm{sale}}{\mathrm{Total}\mathrm{units}\mathrm{available}\mathrm{for}\mathrm{sale}}\times \mathrm{units}\mathrm{in}\mathrm{ending}\mathrm{inventory}\\ & =& \frac{\$1,560,000}{50,000}\times 8,500\\ & =& \$265,200\end{array}$