FIFO vs average cost method a b Calculate the cost of goods

FIFO vs. average cost method

a)

?b)   Calculate the cost of goods sold and ending inventory using AVERAGE COST METHOD.

Cost of goods sold    = $ ?

Ending inventory = $ ?

Flounder Limited uses a perpetual inventory system. The inventory records show the following data for its first month of operations: Date Explanation Units Unit Cost Total Cost Balance in Units Aug. 2 Purchases 237 $71 $16,827 237 3 Purchases 524 105 55,020 761 10 Sales (307 ) 454 15 Purchases 938 122 114,436 1,392 25 Sales (319 ) 1,073

Solution

A)FiFo Method used

Cost of goods sold=begging inventory+purchase-ending inventory

Beggining inventory=0

Purchases=16827$+55020$+114436$=186283$

Ending inventory= (135×105)+(938×122)=128611$

Cost of goods sold=0+186283$-128611$=57672$

Ending inventory= 128611$

B) Average cost Method

Average Rate= Total Cost of inventory/total numberof units of inventory

Total cost of inventory=16827$+55020$+114436$=186283$

Number of units of inventory= 237+524+938=1699

Average Rate = 186283$/1699=109.64$

Cost of goods sold=( begging number of units+Purchases-Ending number ofunits)×Average Rate

=(0+1699-1073)×109.64$ =68634.64$

ending inventory= ending number of units inventory× average rate

=1073×109.64$=117643.72$