# Ch10 - Chapter 10 Cost of Goods Sold and Inventory E 10-7...

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Chapter 10 Cost of Goods Sold and Inventory E 10-7 Using FIFO, LIFO, and Average Cost Quantity × Cost per Unit = Total Cost 60 units \$130 \$7,800 110 \$125 13,750 90 \$122 10,980 80 \$120 9,600 340 Total cost of goods available for sale \$42,130 1. Cost Data FIFO a. Cost of goods available for sale \$ 42,130 b. Cost of ending inventory: 80 units × \$120 \$9,600 5 units × \$122 610 \$10,210 c. Cost of goods sold Cost of goods available for sale \$42,130 Less: Ending inventory (10,210 ) Cost of goods sold \$ 31,920 LIFO a. Cost of goods available for sale \$ 42,130 b. Cost of ending inventory: 60 units × \$130 \$7,800 25 units × \$125 3,125 \$10,925 c. Cost of goods sold Cost of goods available for sale \$42,130 Less: Ending inventory (10,925 ) Cost of goods sold \$ 31,205 Chapter 10 – 1

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Average Cost a. Cost of goods available for sale \$ 42,130 b. Weighted average cost (\$42,130/340) \$123.91/unit Cost of ending inventory (85 units × \$123.91) \$ 10,532 c. Cost of goods sold Cost of goods available for sale \$42,130 Less: Ending inventory (10,532 ) Cost of goods sold \$ 31,598 2. The cost of goods sold under the FIFO method is the highest of the three because the prices are declining ; therefore, the higher costs are allocated to the goods sold. Under the LIFO method, the cost is lower because the lower-priced items were purchased last and these are the ones that were assumed to have been sold. The average cost value is a middle value, because it is an average of all costs, and the quantity purchased was about equally divided between the first two and last two
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Ch10 - Chapter 10 Cost of Goods Sold and Inventory E 10-7...

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