Question

Ehlo Company is a multiproduct firm. Presented below is information concerning one of its products, the Hawkeye.

Date Transaction Quantity Price/Cost

1/1 Beginning inventory 1,000 $12

2/4 Purchase 2,000 18

2/20 Sale 2,500 30

4/2 Purchase 3,000 23

11/4 Sale 2,200 33

Instructions

Compute cost of goods sold, assuming Ehlo uses:

(a) Periodic system, FIFO cost flow. (d) Perpetual system, LIFO cost flow.

(b) Perpetual system, FIFO cost flow. (e) Periodic system, weighted-average

cost flow.

(c) Periodic system, LIFO cost flow. (f) Perpetual system, moving-average

cost flow.

Short answer

Cost of good sold in situation of part of a, b, c, d, e, and f are $87,100, $87,100, $99,600, $92,600, $91,650 and $87,146 respectively.

Step-by-step solution

Periodic system, FIFO cost flow

$\begin{array}{rcl}\mathrm{Ending}\mathrm{inventory}\left(\mathrm{Units}\right)& =& \mathrm{Total}\mathrm{goods}\mathrm{available}\mathrm{for}\mathrm{sale}\left(\mathrm{units}\right)-\mathrm{Total}\mathrm{goods}\mathrm{sold}\left(\mathrm{units}\right)\\ & =& \left(1000+2000+3000\right)-\left(2500+2200\right)\\ & =& 6000-4700\\ & =& 1300\\ & & \\ \mathrm{Ending}\mathrm{inventory}\left(\mathrm{value}\right)& =& 1300\mathrm{units}\mathrm{purchased}\mathrm{on}2\mathrm{nd}\mathrm{April}\times \mathrm{Price}\mathrm{cost}\\ & =& 1300\times \$23\\ & =& \$29,900\\ & & \\ \mathrm{Cost}\mathrm{of}\mathrm{goods}\mathrm{sold}\left(\mathrm{value}\right)& =& \mathrm{Total}\mathrm{goods}\mathrm{available}\mathrm{for}\mathrm{sale}\left(\mathrm{value}\right)-\mathrm{Value}\mathrm{of}\mathrm{ending}\mathrm{inventory}\\ & =& \left(1000\times \$12+2000\times \$18+3000\times \$23\right)-\$29,900\\ & =& \$117,000-29,900\\ & =& \$87,100\end{array}$

Perpetual system, FIFO cost flow

Date	Beginning / Purchase			Cost of goods sold			Balance
	Units	Cost	Amount	Units	Cost	Amount	Units	Cost	Amount
1/1	1000	$12	$12,000				1000	$12	$12,000
2/4	2000	$18	$36,000				1000	$12	$12000
							2000	$18	$36000
							3000		$48,000
2/20				1000	$12	$12000
				1500	$18	$27,000	500	$18	$9000
4/2	3000	$23	$69000				500	$18	$9000
							3000	$23	$69000
							3500		$78000
11/4				500	$18	$9000
				1700	$23	$39100	1300	$23	$29900
Total				4700		$87100	1300	$3	$29900

The cost of goods sold under FIFO is $87,100.

Periodic system, LIFO cost flow

$\begin{array}{rcl}\mathrm{Ending}\mathrm{inventory}\left(\mathrm{units}\right)& =& \mathrm{Total}\mathrm{goods}\mathrm{available}\mathrm{for}\mathrm{sale}\left(\mathrm{units}\right)-\mathrm{Total}\mathrm{goods}\mathrm{sold}\left(\mathrm{units}\right)\\ & =& \left(1000+2000+3000\right)-\left(2500+2200\right)\\ & =& 6000-4700\\ & =& 1300\\ & & \\ \mathrm{Ending}\mathrm{inventory}\left(\mathrm{value}\right)& =& \left(100\mathrm{units}\mathrm{of}\mathrm{beginning}\mathrm{inventory}\times \mathrm{cost}\right)+\left(300\mathrm{units}\mathrm{of}2\mathrm{nd}\mathrm{feb}\mathrm{purchase}\times \mathrm{cost}\right)\\ & =& \left(1000\times \$12\right)+\left(300\times \$18\right)\\ & =& \$17,400\\ & & \\ \mathrm{Cost}\mathrm{of}\mathrm{goods}\mathrm{sold}\left(\mathrm{value}\right)& =& \mathrm{Total}\mathrm{goods}\mathrm{available}\mathrm{for}\mathrm{sale}\left(\mathrm{value}\right)-\mathrm{Value}\mathrm{of}\mathrm{ending}\mathrm{inventory}\\ & =& \left(1000\times \$12+2000\times \$18+3000\times \$23\right)-\$17,400\\ & =& \$117,000-\$17,400\\ & =& \$99,600\end{array}$

Perpetual system, LIFO cost flow

Date	Beginning / Purchase			Cost of goods sold			Balance
	Units	Cost	Amount	Units	Cost	Amount	Units	Cost	Amount
1/1	1000	$12	$12,000				1000	$12	$12000
2/4	2000	$18	$36,000				1000	$12	$12000
							2000	$18	$36000
							3000		$48,000
2/20				2000	$18	$36000
				500	$12	$6000	500	$12	$6000
4/2	3000	$23	$69000				500	$12	$6000
							3000	$23	$69000
							3500		$75000
11/4				2200	$23	$50,600	500	$12	$6000
							800	$23	$18,400
Total				4700		$92600	1300		$24,400

The cost of goods sold under FIFO is $92,600.

Periodic system, weighted average cost flow

$\begin{array}{rcl}\mathrm{Ending}\mathrm{inventory}\left(\mathrm{units}\right)& =& \mathrm{Total}\mathrm{goods}\mathrm{available}\mathrm{for}\mathrm{sale}\left(\mathrm{units}\right)-\mathrm{Total}\mathrm{goods}\mathrm{sold}\left(\mathrm{units}\right)\\ & =& \left(1000+2000+3000\right)-\left(2500+2200\right)\\ & =& 6000-4700\\ & =& 1300\\ & & \\ \mathrm{Average}\mathrm{cost}& =& \frac{\mathrm{Value}\mathrm{of}\mathrm{all}\mathrm{inventories}}{\mathrm{Total}\mathrm{inventories}\left(\mathrm{units}\right)}\\ & =& \frac{\left(1000\times \$12+2000\times \$18+3000\times \$23\right)}{1000+2000+3000}\\ & =& \frac{\$117000}{6000}\\ & =& \$19.5\\ & & \\ \mathrm{Cost}\mathrm{of}\mathrm{goods}\mathrm{sold}\left(\mathrm{value}\right)& =& \mathrm{Total}\mathrm{goods}\mathrm{available}\mathrm{for}\mathrm{sale}\left(\mathrm{value}\right)-\mathrm{Value}\mathrm{of}\mathrm{ending}\mathrm{inventory}\\ & =& \$117,000-\left(\$1300\times \$19.5\right)\\ & =& \$117,000-\$25,350\\ & =& \$91,650\end{array}$

Perpetual system, weighted average cost flow

Date	Beginning / Purchase			Cost of goods sold			Balance
	Units	Cost	Amount	Units	Cost	Amount	Units	Cost	Amount
1/1	1000	$12	$12,000				1000	$12	$12000
2/4	2000	$18	$36,000				1000	$12	$12000
							2000	$18	$36000
							3000	$16	$48,000
2/20				2500	$16	$40000	500	$16	$8000
4/2	3000	$23	$69000				500	$16	$8000
							3000	$23	$69000
							3500	$21.43	$75000
11/4				2200	$21.43	$47,146	1300	$21.43	$27,859
Total				4700		$87,146	1300		$27,859

The cost of goods sold under FIFO is $87,146.