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Chapter 6: 7SE_1 (page 359)

Question:Refer to Short Exercises S6-4 through S6-6. After completing those exercises, answer the following questions:

Requirements

1. Which inventory costing method produced the lowest cost of goods sold?

Short Answer

Expert verified

FIFO method produces the lowest Cost of goods sold.

Step by step solution

01

Step-by-Step-SolutionStep1: COGS computed under different conditions

The inventory methods used in the previous exercises used inventory methods namely 鈥� FIFO, LIFO, and Weighted Average Cost

The COGS under each of the case are as follow 鈥�

FIFO:$2,000

LIFO:$2,312

Weighted Average:$2,108

02

Lowest COGS

As can be seen from the above figures, the lowest COGS amounts to$2,000. This lowest cost of goods sold is the result of the FIFO method which values the issued stocks on the historical prices.

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Most popular questions from this chapter

Question:The periodic inventory records of Flexon Prosthetics indicate the following for the month of July:

Jul. 1 Beginning merchandise inventory 6 units @ \( 60 each

8 Purchase 5 units @ \) 67 each

15 Purchase 10 units @ \( 70 each

26 Purchase 5 units @ \) 85 each

At July 31, Flexon counts four units of merchandise inventory on hand.

Compute ending merchandise inventory and cost of goods sold for Flexon using theFIFO inventory costing method.

Question:Assume that Toys Galore store bought and sold a line of dolls during December as follows:

Dec. 1 Beginning merchandise inventory 13 units @ \( 9 each

8 Sale 8 units @ \) 22 each

14 Purchase 16 units @ \( 14 each

21 Sale 14 units @ \) 22 each

Requirements

1. Compute the cost of goods sold, cost of ending merchandise inventory, and grossprofit using the FIFO inventory costing method.

Question:Assume that Toys Galore store bought and sold a line of dolls during December as follows:

Dec. 1 Beginning merchandise inventory 13 units @ \( 9 each

8 Sale 8 units @ \) 22 each

14 Purchase 16 units @ \( 14 each

21 Sale 14 units @ \) 22 each

Requirements

2. Compute the cost of goods sold, cost of ending merchandise inventory, and grossprofit using the LIFO inventory costing method.

When using a perpetual inventory system and the weighted-average inventory costing method, when does the business compute a new weighted-average cost per unit?

Steel Mill began August with 50 units of iron inventory that cost \(35 each. During August, the company completed the following inventory transactions:

Units Unit Cost Unit Sales Price

Aug. 3 Sale 45 \) 85

8 Purchase 90 $ 54

21 Sale 85 88

30 Purchase 15 58

Requirements

3. Prepare a perpetual inventory record for the merchandise inventory using the weighted-average inventory costing method.
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