Business Math: Ch 18: Assigning Costs to Ending Inventory

Steps to Calculating the Specific Identification Method.

1) Calculate the cost of goods. 2) Calculate the cost of the ending inventory. 3) Calculate the cost of goods sold.

Cost of Goods Available for Sale - Cost of Ending Inventory = ???

Cost of Goods Sold

The specific identification method is able to identify in the ending inventory the actual invoice cost associated with it. (T/F)

False

Cost of goods sold is equal to cost of goods available for sale:

The cost of goods sold equals the cost of goods available for sale less the ending value of inventory.

a. Calculate the cost of ending inventory using the weighted-average method (ending inventory shows 60 units). b. Calculate the cost of goods sold using the weighted-average method. Given: Inventory : # Purchased : Cost per Unit : Total Jan 1: 39 : $5 : $195 April 1: 59 : $8 : $472 June 1: 49 : $9 : $441 Nov 1: 54 : $10 : $540 Total: 201 : $1,648

Weighted Average Cost per Unit = Total Cost of Purchase / Total Units $1,648/201 = $8.199 A) Cost of Ending Inventory Weighted Average Cost per Unit x # of Units in Ending inventory $8.199 x 60 = $491.94 B) Value of Cost of Goods Sold [Total Units - # of Units in Ending inventory] x Weighted Average Cost per Unit [201-60] x $8.199 [141] x x $8.199 $1,156.059

The _____________ ______________ method assigns the specific cost of each inventory item to cost of goods sold.

specific identification method

From the following, calculate the cost of ending inventory and cost of goods sold for the FIFO method, ending inventory is 54 units. Beginning inventory: Units : Unit Cost January 1 5 $3.50 April 10 10 4.00 May 15 12 4.50 July 22 15 4.75 August 19 18 5.50 September 30 20 5.70 November 10 32 5.90 December 15 16 6.30

Beginning inventory: Units : Unit Cost January 1 5 $3.50 April 10 10 4.00 May 15 12 4.50 July 22 15 4.75 August 19 18 5.50 September 30 20 5.70 November 10 32 5.90 December 15 16 6.30 Total: $685.35 Cost of Ending Inventory 54 - 32 - 16 = 6 December 15 16 x $6.30 = 100.80 November 10 32 x $5.90 = 188.80 September 30 6 x $5.70 = 34.20 Total: $323.80 Cost of Goods Sold $685.35 - $323.80 = $361.55

From the following, calculate the cost of ending inventory and cost of goods sold for the weighted-average method, ending inventory is 56 units. Beginning inventory: Units : Unit cost January 1 : 4 : $1.80 April 10 : 11 : $2.30 May 15 : 11 : $2.80 July 22 : 16 : $3.05 August 19 : 17 : $3.80 September 30 : 21 : $4.00 November 10 : 31 : $4.20 December 15 : 17 : $4.60

Beginning inventory: Units : Unit cost January 1 : 4 x $1.80 April 10 : 11 x $2.30 May 15 : 11 x $2.80 July 22 : 16 x $3.05 August 19 : 17 x $3.80 September 30 : 21 x $4.00 November 10 : 31 x $4.20 December 15 : 17 x $4.60 Total 128 : $469.10 Weighted Average Cost: $469.10/ 128 = $3.665 Ending Inventory: 56 x $3.665 = $205.23 Cost of Goods Sold: $469.10 - $205.24 = $263.87

From the following, calculate the cost of ending inventory and cost of goods sold for the LIFO method, ending inventory is 51 units. Beginning inventory: Units : Unit cost January 1 : 4 : $2.20 April 10 : 11 : 2.70 May 15 : 11 : 3.20 July 22 : 16 : 3.45 August 19 : 17 : 4.20 September 30 : 21 : 4.40 November 10 : 31 : 4.60 December 15 : 17 : 5.00

Beginning inventory: Units : Unit cost January 1 : 4 x $2.20 = $8.80 April 10 : 11 x $2.70 = $29.70 May 15 : 11 x $3.20 = $35.20 July 22 : 16 x $3.45 = $55.20 August 19 : 17 x $4.20 = $71.40 September 30 : 21 x $4.40 = $92.4 November 10 : 31 x $4.60 = $142.60 December 15 : 17 x $5.00 = $85 Total: : 128 : $520.30 Beginning inventory: Units : Unit cost January 1 : 4 x $2.20 = $8.80 April 10 : 11 x $2.70 = 29.70 May 15 : 11 x $3.20 = 35.20 July 22 : 16 x $3.45 = 55.20 August 19 : x x $4.20 = 37.80 Total : 51 : $166.70 51 - 4-11-11-16 = x x=9 Cost Of goods sold under LIFo method: Total Cost-Ending inventory $520.30 - $166.70 = $353.60

From the following, calculate the cost of ending inventory and cost of goods sold for the FIFO method, ending inventory is 51 units. Beginning inventory: Units : Unit cost January 1 : 6 : $1.30 April 10 : 9 : $1.80 May 15 : 13 : $2.30 July 22 : 14 : $2.55 August 19 : 19 : $3.30 September 30 : 19 : $3.50 November 10 : 33 : $3.70 December 15 : 15 : $4.10

Beginning inventory: Units : Unit cost January 1 : 6 x $1.30 = $7.80 April 10 : 9 x $1.80= $16.20 May 15 : 13 x $2.30= $29.90 July 22 : 14 x $2.55= $35.70 August 19 : 19 x $3.30= $62.70 September 30 : 19 x $3.50= $66.50 November 10 : 33 x $3.70= $122.10 December 15 : 15 x $4.10= $61.50 Totals : 128 $402.40 Cost of Ending Inventory 51 - 15 - 33 = 3 December 15 15 x $4.10 = 61.50 November 10 33 x $3.70 = 122.10 September 30 3 x $3.50 = 10.50 Total: $194.10 Cost of Goods Sold $402.40 - $194.10 = $208.30

Using the specific identification method: a. Calculate the ending inventory. b. Calculate the cost of goods sold. Given: Date Units Purchased Cost per Unit June 1: 16 Echo Show's 360 : $282 July 1: 42 Echo Show's 360 : $257 August 1: 61 Echo Show's 360 : $247 Ending Inventory Date June 1: 2 Echo Show's from June July 1: 18 Echo Show's from June August 1: 15 Echo Show's from June

Ending Inventory: Ending Inventory x Cost per Unit June: 2 Echo x $282 = $564 July: 18 Echo x $257 = $4,626 August: 15 Echo x $247 = $3,705 $564 + $4,626 + $3,705 = $8,895 Cost of Goods Sold: Units Sold x Cost Per Unit June: (16-2) x $282 = $3,948 July: (42-18) x $257 = $6,168 August: (61-15) x $247 = $11,362 $3,948 + $6,168 + $11,362 = $21,478

Using the specific identification method: a. Calculate the ending inventory. b. Calculate the cost of goods sold. Given: Date Units Purchased Cost per Unit March 1: 15 XBox : $275 April 1: 45 XBox : $250 May 1: 60 XBox : $240 Ending Inventory Date March 1: 2 XBox April 1: 15 XBox May 1: 12 XBox

Ending Inventory: Ending Inventory x Cost per Unit March 1: 2 XBox x $275 = $550 April 1: 15 XBox x $250 = $3,750 May 1: 12 XBox x $240 = $2,880 $550 + $3,750 + $2,880 = $7,180 Cost of Goods Sold: Units Sold x Cost Per Unit March: 13 x 275 = $3,575 April: 30 x 250 = $7,500 May: 48 x 240 = $11,520 $3,575 + $7,500 + $11,520 = $22,595

a. Calculate the cost of ending inventory using the FIFO (ending inventory shows 56 units). b. Calculate the cost of goods sold using the FIFO (ending inventory shows 56 units). Given: Inventory : # Purchased : Cost per Unit : Total Jan 1: 35 : $3 : $105 April 1: 55 : $6 : $330 June 1: 45 : $7 : $315 Nov 1: 50 : $8 : $400 Total: 185 : $1,150

Unit sold = 185-56 = 129 units Cost of ending inventory = (50*8 ) + [(56-50) *7 ] = 400+ 42 = 442 Cost of goods sold $1,150 - $442 = $708

a. Calculate the cost of ending inventory using the LIFO (ending inventory shows 61 units). b. Calculate the cost of goods sold using the LIFO (ending inventory shows 61 units). Given: Inventory : # Purchased : Cost per Unit : Total Jan 1: 40 : $4 : $160 April 1: 60 : $7 : $420 June 1: 50 : $8 : $400 Nov 1: 55 : $9 : $495 Total: 205 : $1,475

Units in Ending Inventory: 205-x = 61 Units Sold: 144 Nov Sales: 55 x $9 = $495 June Sales: 50 x $8 = $400 April Sales: 39 x $7 = $273 $495 + $400 + $273 = $1,168 Ending Inventory: Inventory from April 61-40 = 21 Units : Unit Cost : Total 21 $7.00 $147 Inventory From Jan Purchase Units : Unit Cost : Total 40 $4.00 $160 Cost of Ending Inventory: $147 + $160 = $307 Cost of Goods Sold: $1,475 - $307 $1,168

a. Calculate the cost of ending inventory using the LIFO (ending inventory shows 71 units). b. Calculate the cost of goods sold using the LIFO (ending inventory shows 71 units). Given: Inventory : # Purchased : Cost per Unit : Total Jan 1: 50 : $5 : $250 April 1: 70 : $8 : $560 June 1: 60 : $9 : $540 Nov 1: 65 : $10 : $650 Total: 245 : $2,000

Units in Ending Inventory: 245-x = 71 Units Sold: 174 Nov Sales: 65 x $10 = $650 June Sales: 60 x $9 = $540 April Sales: 70 x $8 = $560 $650 + $540 + $560 = $1,750 Ending Inventory: 71-50 = 21 Inventory from April Units : Unit Cost : Total 21 $8.00 $168 Inventory From Jan Purchase Units : Unit Cost : Total 50 $5.00 $250 Cost of Ending Inventory: $168 + $250 = $418 Cost of Goods Sold: $2,000 - $418 $1,582

a. Calculate the cost of ending inventory using the weighted-average method (ending inventory shows 61 units). b. Calculate the cost of goods sold using the weighted-average method. Given: Inventory : # Purchased : Cost per Unit : Total Jan 1: 40 : $4 : $160 April 1: 60 : $7 : $420 June 1: 50 : $8 : $400 Nov 1: 55 : $9 : $495 Total: 205 : $1,475

Weighted Average Cost per Unit = Total Cost of Purchase / Total Units $1,475/205 = $7.195 A) Cost of Ending Inventory Weighted Average Cost per Unit x # of Units in Ending inventory $7.195 x 61 = $438.895 B) Value of Cost of Goods Sold [Total Units - # of Units in Ending inventory] x Weighted Average Cost per Unit [205-61] x $7.195 [144] x x $7.195 $1,036.08

a. Calculate the cost of ending inventory using the FIFO (ending inventory shows 61 units). b. Calculate the cost of goods sold using the FIFO (ending inventory shows 61 units). Given: Inventory : # Purchased : Cost per Unit : Total Jan 1: 40 : $4 : $160 April 1: 60 : $7 : $420 June 1: 50 : $8 : $400 Nov 1: 55 : $9 : $495 Total: 205 : $1,475

a) Unit sold = 205-61 = 144 units Under FIFO units acquired first (that is initial purchase) are sold first and then so on..so ending inventory are out of last purchase . Cost of ending inventory = (55*9 ) + [(61-55) *8 ] = 495+ 48 = 543 Cost of goods sold = 1475 - 543 = 932