Exercise 5-3 A Allocating product cost between cost of goods sold and ending inv
ID: 2367202 • Letter: E
Question
Exercise 5-3 A Allocating product cost between cost of goods sold and ending inventory: multiple purchases. Suggs Company sells coffee makers used in business offices. Its beginning inventory of coffee makers was 400 units at $50 per unit. During the year, Suggs made two batch purchases of coffee makers. The first was a 500-unit purchase at $55 per unit; the second was a 600-unit purchase at $58 per unit. During the period, Suggs sold 1,200 coffee makers. Required Determine the amount of product costs that would be allocated to the cost of goods sold and ending inventory, assuming that Suggs uses: a FIFO b LIFO C. Weighted average.Explanation / Answer
total goods available for sale = 400*50 + 500*55 + 600*58 = $82,300. total number of coffee makers available for sale = 400 + 500 + 600 = 1500. If 1200 were sold, then 300 were left in ending inventory. a. FIFO means first in first out. The 300 left in ending inventory would be from the last ones bought. ENding inventory = 300*58 = $17,400. Cost of goods sold = $82,300 - 17400 = $64,900. b. LIFO means last in first out. The 300 in ending inventory were from the earliest purchases. Ending inventory = 300*50 = $15,000. Cost of goods sold = $82,300 - 15,000 = $67,300. c. weighted average: 82,300/1,500 = $54.866... per coffee maker. Ending inventory = 300*54.866..= $16,460. Cost of goods sold = 82300 - 16460 = $65,840.