Exercise 65 Larkspur Inc uses a periodic inventory system It

Exercise 6-5 Larkspur, Inc. uses a periodic inventory system. Its records show the following for the month of May, in which 80 units were sold Date Units Explanation Inventony Purchase Purchase Total Unit Cost Total Cost May 1 15 24 28 26 39 93 ?252 260 429 $941 $9 10 Calculate the weighted-average unit cost. (Round answer to 3 decimal places, e.g. 5.125.) Weighted-average unit cost LINK TO TEXT VIDEO: APPLIED SKILLS VIDEO: SIMILAR EXERCISE Calculate the ending inventory at May 31 using the FIFO, LIFO and average-cost methods. (Round answers to 0 decimal places, e.g. 125.) FIFO LIFO AVERAGE-COST The ending inventory at May 31

Solution

A. Weighted Average unit Cost = Total cost / Total units

= $941 / 93 = $10.118 per unit

B. If FIFO method is used, the ending inventory represents the MOST RECENT COST incurred to purchase that inventory

So Ending inventory = 93 - 80 = 13 units

Most recent cost = $ 11 per unit

Therefore Cost of ending inventory under FIFO = 13 *$11 = $143

If LIFO method is used, the ending inventory will be cosTed using the EARLIEST PURCHASING COST.

Ending Inventory = 13 units

Earliest Purchasing cost = $9

Cost of Ending Inventory using LIFO = 13*$9 = $117

If Average method is used, the ending inventory will be costed using the AVERAGE COST

Ending Inventory = 13 units

Average Cost = $10.12

Cost of Ending Inventory using Average cost method = 13*$10.118 = $132

Note: Since the company was following periodic inventory system these procedures are followed, but if the company would have been following perpetual inventory system, the procedure would be different.