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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