Exercise 6-5 Larkspur, Inc. uses a periodic inventory system. Its records show t
ID: 2397566 • Letter: E
Question
Exercise 6-5 Larkspur, Inc. uses a periodic inventory system. Its records show the following for the month of May, in which 80 units were sold Date Units Explanation Inventony Purchase Purchase Total Unit Cost Total Cost May 1 15 24 28 26 39 93 ?252 260 429 $941 $9 10 Calculate the weighted-average unit cost. (Round answer to 3 decimal places, e.g. 5.125.) Weighted-average unit cost LINK TO TEXT VIDEO: APPLIED SKILLS VIDEO: SIMILAR EXERCISE Calculate the ending inventory at May 31 using the FIFO, LIFO and average-cost methods. (Round answers to 0 decimal places, e.g. 125.) FIFO LIFO AVERAGE-COST The ending inventory at May 31Explanation / Answer
A. Weighted Average unit Cost = Total cost / Total units
= $941 / 93 = $10.118 per unit
B. If FIFO method is used, the ending inventory represents the MOST RECENT COST incurred to purchase that inventory
So Ending inventory = 93 - 80 = 13 units
Most recent cost = $ 11 per unit
Therefore Cost of ending inventory under FIFO = 13 *$11 = $143
If LIFO method is used, the ending inventory will be cosTed using the EARLIEST PURCHASING COST.
Ending Inventory = 13 units
Earliest Purchasing cost = $9
Cost of Ending Inventory using LIFO = 13*$9 = $117
If Average method is used, the ending inventory will be costed using the AVERAGE COST
Ending Inventory = 13 units
Average Cost = $10.12
Cost of Ending Inventory using Average cost method = 13*$10.118 = $132
Note: Since the company was following periodic inventory system these procedures are followed, but if the company would have been following perpetual inventory system, the procedure would be different.