Causwell Company began 2018 with 27,000 units of inventory on hand. The cost of each unit was $5.00. During 2018 an additional 45,000 units were purchased at a single unit cost, and 37,000 units remained on hand at the end of 2018 (35,000 units, therefore, were sold during 2018). Causwell uses a periodic inventory system. Cost of goods sold for 2018, applying the average cost method, is $192.500. The company is interested in determining what cost of goods sold would have been if the FIFO or LIFO methods were used.Required:1. Determine the cost of goods sold for 2018 using the FIFO method.2. Determine the cost of goods sold for 2018 using the LIFO method.

Respuesta :

Answer:

Causwell Company

                                         FIFO        LIFO

Cost of goods sold    $181,400   $203,000

Explanation:

Data and Calculations:   Units   Unit Cost  Weighted      FIFO       LIFO

Beginning Inventory =   27,000    $5        $135,000    $135,000   $135,000

Purchases of inventory 45,000    $5.8     $261,000   $261,000   $261,000

Goods available             72,000                $396,000  $396,000  $396,000  

Ending Inventory          (37,000)   $5.5    $203,500   $214,600    $193,000

Inventory Sold               35,000    $5.5     $192,500    $181,400  $203,000

Unit cost = $5.00

Computation of the Value of beginning inventory = $135,000 (27,000 x $5)

From the value of Inventory Sold (Cost of goods sold), determine the unit cost.  This is applied to the ending inventory units, to ascertain its value.  This value is added to the cost of goods sold, to determine the cost of goods available for sale, which is made up of the beginning inventory and purchases.  From the Cost of Goods Available for Sale subtract the beginning inventory, to obtain the purchases in amount.  Divide the value by units and you obtain the unit cost.