Answer:
a, Inventory cost under First in first out- FIFO = $ 4,628
b. Inventory cost under Last in First Out LIFO = $ 4,378
c. Inventory cost under Weighted average cost = $ 4,494
Explanation:
The data need to be summarised
Units Per Unit Cost Total value
August 1 Opening inventory 80 $ 1,600
August 5 Purchases 100 $ 2,116
August 11 Purchases <u>200</u> <u> $ 4,416</u>
Weighted average cost 380 $ 21.4 $ 8,132
August 11 Sales <u>(170)</u>
Units in hand after Aug 11 sales 210
Computation on inventory cost under FIFO method
Under FIFO method the cost of goods sold are considered from the opening inventory and the first purchases. The inventory on hand is from the last purchases.
The inventory on hand of 210 units, of which 200 units are from August 11 and 10 units from the purchases of August 5.
The average unit cost of Aug 11 purchases is $ 4,416/ 200 units = $ 22.08
The average unit cost of Aug 05 purchases is $ 2,116 /100 units = $ 21.16
200 units * $ 22.08 = $ 4,416.00
10 units * $ 21.16 = <u>$ 211.60</u>
$ 4627.60 say $ 4,628
Computation on inventory cost under LIFO method
Under LIFO method the cost of goods sold are considered from the last purchases and the inventory on hand is from the opening inventory and first purchases.
The inventory on hand of 210 units is as follows
Opening inventory 80 units $ 1,600
Purchases August 5 100 units $ 2,116
Purchases August 11 30 [email protected] $22.08 <u>$ 662.40</u>
Inventory under LIFO Method $ 4,378.40
Computation on inventory cost under Weighted Average method
The weighted average cost of inventory is 210 units * $ 21.40 = $ 4,494
