1 we dont know the exact nature of chens product but

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1. We don’t know the exact nature of Chen’s product. But, in many circumstances, the first-in, first-out method most closely reﬂects the physical ﬂow of inventory. First-in, first-out physical ﬂow is critical when inventory is perishable or in situations in which the earliest items acquired are moved out first because of risk of deterioration or obsolescence such as technology products and retail items. However, if Chen’s product purchases are intermixed and can’t be physically separated (such as for T-shirts, or gasoline in a tank) then the average cost method would be most descriptive of the physical ﬂow of inventory. 2. Last-in, first-out yields the highest cost of goods sold expense during periods of rising unit costs, which in turn, results in the lowest taxable income and the lowest income tax. 3. The first-in, first-out method results in the lowest cost of goods sold, and the largest amount of income, in periods of rising prices. Of course, this assumes that prices will continue to rise as they have in the past. Companies cannot change inventory costing methods without justification, and the change may be restricted by tax laws as well.
Correct Marks for this submission: 1.00/1.00.
5/10/2018 REQUIRED HOMEWORK - MODULE 6 7/11 QUESTION 4 Correct 1.00 points out of 1.00 Computing Cost of Sales and Ending Inventory Howell Company has the following financial records for the current period. Units Unit Cost Beginning Inventory 150 \$100 Purchases: #1 600 96 #2 500 92 #3 250 90 Ending inventory is 350 units. Compute the ending inventory and the cost of goods sold for the current period using (a) first-in, first out, (b) average cost, and (c) last-in, first out. (Hint: For average cost, round average cost per unit to two decimal places for calculation of ending inventory. Round to the nearest whole number. Cost of goods sold = Cost of goods available for sale less ending inventory.) (a) First-in, first-out Ending inventory \$ 31,700 Cost of goods sold \$ 109,400 (b) Average cost Ending inventory \$ 32,925 Cost of goods sold \$ 108,175 (c) Last-in, first-out Ending inventory \$ 34,200 Cost of goods sold \$ 106,900 Units Cost Total Beginning Inventory 150 @ \$100 = \$15,000 Purchases: #1 600 @ 96 = 57,600 #2 500 @ 92 = 46,000 #3 2 50 @ 90 = 2 2,500 Cost of goods available for sale 1. 500 \$ 141,100 a. First-in, First-out Units Cost Total 100 @ \$92 = \$ 9,200 2 50 @ 90 = 2 2,500 Ending inventory 3 50 \$ 31,700
5/10/2018 REQUIRED HOMEWORK - MODULE 6
8/11 Correct Marks for this submission: 1.00/1.00.
5/10/2018 REQUIRED HOMEWORK - MODULE 6