Question

eriodic inventory using FIFO, LIFO, and weighted average cost methods

The units of an item available for sale during the year were as follows:

Date Line Item Description Units Cost per Unit Amount
Jan. 1 Inventory 19 units at $42 $798
Aug. 13 Purchase 10 units at $43 430
Nov. 30 Purchase 6 units at $44 264
Available for sale 35 units $1,492
There are 17 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost using the (a) first-in, first-out (FIFO) method; (b) last-in, first-out (LIFO) method; and (c) weighted average cost method (round per-unit cost to two decimal places and your final answer to the nearest whole dollar).

Line Item Description Amount
a. First-in, first-out (FIFO) method $fill in the blank 1
b. Last-in, first-out (LIFO) method $fill in the blank 2
c. Weighted average cost method

Answer 1

To calculate the inventory costs using the FIFO, LIFO, and weighted average cost methods, we follow these steps based on the provided data:

### Given Data:
- **Inventory on Jan 1**: 19 units at $42 = $798
- **Purchase on Aug 13**: 10 units at $43 = $430
- **Purchase on Nov 30**: 6 units at $44 = $264
- **Total Available for Sale**: 35 units for $1,492
- **Units in Physical Inventory at Dec 31**: 17 units

### a. First-In, First-Out (FIFO) Method
Under the FIFO method, we assume that the earliest goods purchased are the first to be sold.

**Units Sold**:
- Total units available = 35
- Units sold = Total available - Units remaining = 35 - 17 = 18 units

**Cost of Remaining Inventory**:
1. The last 17 units are valued based on the most recent purchases:
- 6 units at $44 (Nov 30 purchase)
- 10 units at $43 (Aug 13 purchase)
- 1 unit from the Jan 1 inventory at $42

Calculating:
- 6 units at $44 = 6 × 44 = $264
- 10 units at $43 = 10 × 43 = $430
- 1 unit at $42 = 1 × 42 = $42

**Total Cost of Ending Inventory (FIFO)**:
\[ 6 \times 44 + 10 \times 43 + 1 \times 42 = 264 + 430 + 42 = 736 \]

**Result**:
- **FIFO Ending Inventory**: **$736**

### b. Last-In, First-Out (LIFO) Method
Under the LIFO method, we assume that the most recently purchased goods are the first to be sold.

**Cost of Remaining Inventory**:
1. The first 17 units (remaining) will be from the older inventory:
- 6 units at $42 (Jan 1 inventory)
- 10 units at $43 (Aug 13 purchase)
- 1 unit at $43 (from the Aug purchase)

Calculating:
- 6 units at $42 = 6 × 42 = $252
- 10 units at $43 = 10 × 43 = $430
- 1 unit at $44 = 1 × 44 = $44 (This step is not necessary since we already are considering only two older purchases)

**Total Cost of Ending Inventory (LIFO)**:
\[ 6 \times 42 + 10 \times 43 = 252 + 430 = 682 \]

**Result**:
- **LIFO Ending Inventory**: **$682**

### c. Weighted Average Cost Method
Under this method, we calculate the average cost per unit of the inventory.

**Weighted Average Cost Calculation**:
Total cost of inventory = $1,492
Total units available = 35

**Average Cost per Unit**:
\[ \text{Average Cost} = \frac{\text{Total Cost}}{\text{Total Units}} = \frac{1492}{35} \approx 42.63 \]

**Cost of Ending Inventory**:
Cost of ending inventory thus will be:
\[ \text{Ending Inventory} = \text{Average Cost} \times \text{Units Remaining} = 42.63 \times 17 \approx 725.71 \]

Rounded to the nearest whole dollar: **$726**

### Final Results:
1. **a. FIFO**: $736
2. **b. LIFO**: $682
3. **c. Weighted Average Cost**: $726

Therefore, the final inventory costs are:
- a. **$736**
- b. **$682**
- c. **$726**