6P Ehlo Company is a multiproduct f... [FREE SOLUTION]

Chapter 8: 6P (page 433)

Ehlo Company is a multiproduct firm. Presented below is information concerning one of its products, the Hawkeye.
Date Transaction Quantity Price/Cost
1/1 Beginning inventory 1,000 $12
2/4 Purchase 2,000 18
2/20 Sale 2,500 30
4/2 Purchase 3,000 23
11/4 Sale 2,200 33
Instructions
Compute cost of goods sold, assuming Ehlo uses:
(a) Periodic system, FIFO cost flow. (d) Perpetual system, LIFO cost flow.
(b) Perpetual system, FIFO cost flow. (e) Periodic system, weighted-average
cost flow.
(c) Periodic system, LIFO cost flow. (f) Perpetual system, moving-average
cost flow.

Short Answer

Expert verified

Cost of good sold in situation of part of a, b, c, d, e, and f are $87,100, $87,100, $99,600, $92,600, $91,650 and $87,146 respectively.

Step by step solution

Periodic system, FIFO cost flow

$\begin{array}{rcl} Ending inventory (Units) & = & Total goods available for sale (units) - Total goods sold (units) \\ = & (1000 + 2000 + 3000) - (2500 + 2200) \\ = & 6000 - 4700 \\ = & 1300 \\ Ending inventory (value) & = & 1300 units purchased on 2 nd April 脳 Price cost \\ = & 1300 脳 $ 23 \\ = & $ 29, 900 \\ Cost of goods sold (value) & = & Total goods available for sale (value) - Value of ending inventory \\ = & (1000 脳 $ 12 + 2000 脳 $ 18 + 3000 脳 $ 23) - $ 29, 900 \\ = & $ 117, 000 - 29, 900 \\ = & $ 87, 100 \end{array}$

Perpetual system, FIFO cost flow

Date	Beginning / Purchase			Cost of goods sold			Balance
Date	Units	Cost	Amount	Units	Cost	Amount	Units	Cost	Amount

1/1	1000	$12	$12,000				1000	$12	$12,000
2/4	2000	$18	$36,000				1000	$12	$12000
							2000	$18	$36000
							3000		$48,000
2/20				1000	$12	$12000
				1500	$18	$27,000	500	$18	$9000

4/2	3000	$23	$69000				500	$18	$9000
							3000	$23	$69000
							3500		$78000

11/4				500	$18	$9000
				1700	$23	$39100	1300	$23	$29900
Total				4700		$87100	1300	$3	$29900

The cost of goods sold under FIFO is $87,100.

Periodic system, LIFO cost flow

$\begin{array}{rcl} Ending inventory (units) & = & Total goods available for sale (units) - Total goods sold (units) \\ = & (1000 + 2000 + 3000) - (2500 + 2200) \\ = & 6000 - 4700 \\ = & 1300 \\ Ending inventory (value) & = & (100 units of beginning inventory 脳 cost) + (300 units of 2 nd feb purchase 脳 cost) \\ = & (1000 脳 $ 12) + (300 脳 $ 18) \\ = & $ 17, 400 \\ Cost of goods sold (value) & = & Total goods available for sale (value) - Value of ending inventory \\ = & (1000 脳 $ 12 + 2000 脳 $ 18 + 3000 脳 $ 23) - $ 17, 400 \\ = & $ 117, 000 - $ 17, 400 \\ = & $ 99, 600 \end{array}$

Perpetual system, LIFO cost flow

Date	Beginning / Purchase			Cost of goods sold			Balance
Date	Units	Cost	Amount	Units	Cost	Amount	Units	Cost	Amount

1/1	1000	$12	$12,000				1000	$12	$12000
2/4	2000	$18	$36,000				1000	$12	$12000
							2000	$18	$36000
							3000		$48,000
2/20				2000	$18	$36000
				500	$12	$6000	500	$12	$6000

4/2	3000	$23	$69000				500	$12	$6000
							3000	$23	$69000
							3500		$75000

11/4				2200	$23	$50,600	500	$12	$6000
							800	$23	$18,400
Total				4700		$92600	1300		$24,400

The cost of goods sold under FIFO is $92,600.

Periodic system, weighted average cost flow

$\begin{array}{rcl} Ending inventory (units) & = & Total goods available for sale (units) - Total goods sold (units) \\ = & (1000 + 2000 + 3000) - (2500 + 2200) \\ = & 6000 - 4700 \\ = & 1300 \\ Average cost & = & \frac{Value of all inventories}{Total inventories (units)} \\ = & \frac{(1000 脳 $ 12 + 2000 脳 $ 18 + 3000 脳 $ 23)}{1000 + 2000 + 3000} \\ = & \frac{$ 117000}{6000} \\ = & $ 19.5 \\ Cost of goods sold (value) & = & Total goods available for sale (value) - Value of ending inventory \\ = & $ 117, 000 - ($ 1300 脳 $ 19.5) \\ = & $ 117, 000 - $ 25, 350 \\ = & $ 91, 650 \end{array}$

Perpetual system, weighted average cost flow

Date	Beginning / Purchase			Cost of goods sold			Balance
Date	Units	Cost	Amount	Units	Cost	Amount	Units	Cost	Amount

1/1	1000	$12	$12,000				1000	$12	$12000
2/4	2000	$18	$36,000				1000	$12	$12000
							2000	$18	$36000
							3000	$16	$48,000

2/20				2500	$16	$40000	500	$16	$8000

4/2	3000	$23	$69000				500	$16	$8000
							3000	$23	$69000
							3500	$21.43	$75000

11/4				2200	$21.43	$47,146	1300	$21.43	$27,859
Total				4700		$87,146	1300		$27,859

The cost of goods sold under FIFO is $87,146.

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Short Answer

Step by step solution

Periodic system, FIFO cost flow

Perpetual system, FIFO cost flow

Periodic system, LIFO cost flow

Perpetual system, LIFO cost flow

Periodic system, weighted average cost flow

Perpetual system, weighted average cost flow

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