Shawn company had 150 units in the beginning inventory at a total cost of 15,750. The company...

Question:

Shawn company had 150 units in the beginning inventory at a total cost of 15,750. The company purchased 300 units at total cost of 39,000. At the end of the year, Shawn had 113 units in ending inventory. Compute the of cost ending inventory and cost of goods sold under FIFO, LIFO, and average cost. Round average cost per unit and final answers to 0 decimal places.

Inventory Valuation Methods:

Some of the common inventory valuation methods are first-in, first-out (FIFO), last-in, first-out (LIFO), and average cost. FIFO assumes the first units in inventory are the first sold. LIFO assumes the last units in inventory are the first sold. The average cost method calculates an average cost per unit and it applies it to units sold and units in ending inventory. Each will result in a different cost of goods sold and ending inventory.

Answer and Explanation:


To calculate the unit cost use the following formula:

  • Unit cost = Total cost / Units
  • Unit cost for beginning inventory = $15,750 / 150 units = $105 per unit
  • Unit cost for purchased units = $39,000 / 300 units = $130 per unit

Units Unit Cost Total Cost
Beginning inventory 150 $105 $15,750
Purchases 300 $130 $39,000
Total 450 $54,750

  • Units sold = Total units - Units in ending inventory
  • Units sold = 450 units - 113 units = 337 units

Shawn company sold 337 units.

FIFO


The FIFO inventory method assumes that the first units in inventory are the first units sold.

FIFO Cost of Goods Sold

The 337 units sold consist of the 150 units from beginning inventory and 187 units from purchases.

FIFO Units Unit Cost Cost of goods sold
Beginning inventory 150 $105 $15,750
Purchases 187 $130 $24,310
Total 337 $40,060

FIFO Ending Inventory

The 113 units in ending inventory will be from the purchases.

FIFO Units Unit Cost Ending Inventory
Purchases 113 $130 $14,690
Total 113 $14,690


LIFO


The LIFO inventory method assumes the last units in inventory are the first ones sold.

LIFO Cost of Goods Sold

The 337 units sold consist of the 300 units from purchases and 37 units from beginning inventory.

LIFO Units Unit Cost Cost of goods sold
Purchases 300 $130 $39,000
Beginning inventory 37 $105 $3,885
Total 337 $42,885

LIFO Ending Inventory

The 113 units in ending inventory will be from beginning inventory.

LIFO Units Unit Cost Ending Inventory
Beginning inventory 113 $105 $11,865
Total 113 $11,865


Average Cost


To calculate the average cost per unit use the following formula:

  • Average cost per unit = Total cost / Total units
  • Average cost per unit = $54,750 / 450 units = $122 per unit

Average Cost of Goods Sold

The average cost of goods sold is:

  • Average cost of goods sold = Average cost per unit * Units sold
  • Average cost of goods sold = $122 per unit * 337 units = $41,114

Average Ending Inventory

The average ending inventory is:

  • Average ending inventory = Average cost per unit * Units in ending inventory
  • Average ending inventory = $122 per unit * 113 units = $13,786

Learn more about this topic:

Inventory Valuation Methods: Specific Identification, FIFO, LIFO & Weighted Average

from Accounting 101: Financial Accounting

Chapter 6 / Lesson 11
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