Question:
I'm having trouble figuring this out. Any input would be greatly appreciated!
The units of an item available for sale during the year were as follows:
Jan. 1 Inventory 18 units @ $40
Feb. 26 Purchase 36 units @ $46
June 18 Purchase 42 units @ $52
Dec. 29 Purchase 24 units @ $55
There are 33 units of the physical item in the inventory at December 31. The periodic inventory is used. Determine the inventory cost by the (a) first in, first out method, (b) last in, first out method, (c) average cost method.
I've been struggling trying to get this figured out so I would appreciate any help I could get. Thank you so much, in advance!
Answers:
(a) FIFO
This assumes the 1st units purchased were already sold so the 33 units on hand on Dec 31 must have come from the latest shipments, so you work backwards:
24 units @ $55 plus 9 units @ $52 = $1,788
(b) LIFO
This assumes the latest shipments were the 1st to be sold so your 33 units on hand must have come from the earliest shipments, so you work forwards:
18 units @ $40 + 15 units @ $46 = $1,410
(c) Average cost
Jan. 1 Inventory 18 units @ $40 = $720
Feb. 26 Purchase 36 units @ $46 = $1,656
June 18 Purchase 42 units @ $52 = $2,184
Dec. 29 Purchase 24 units @ $55 = $1,320
Total 120 units cost $5,880, so
33 units cost $1,617
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