Problem 6-3A Sekhon Company had a beginning inventory on January 1 of 160 units

Question

Problem 6-3A Sekhon Company had a beginning inventory on January 1 of 160 units of Product 4-18-15 at a cost of $20 per unit. During the year, the following purchases were made. Mar. 15 400 units at $23 Sept. 4 330 units at $26 July 20 250 units at 24 Dec. 2 100 units at $29 1,000 units were sold. Sekhon Company uses a periodic inventory system. Your answer is incorrect. Try again. Determine the cost of goods available for sale. The cost of goods available for sale LINK TO TEXT Your answer is incorrect. Try again Calculate average cost per unit. (Round answer to 3 decimal places, e.g. 1.250.) Average cost per unit LINK TO TEXT

Explanation / Answer

Part - (1) Cost of Goods available for sale = (Opening inventory +Purchase inventory) Units Rate Amount ($) Jan 1                160             20          3,200 Mar 15                400             23          9,200 July 20                250             24          6,000 Sept 4                330             26          8,580 Dec 2                100             29          2,900             1,240 Cost of Goods available for sale        29,880 Part - (2) Average Cost per Unit = (Cost of Goods available for sale / Total units) = (29,880/1,240) = 24.097 Part - (3) Inventory Method Cost of Ending Inventory Cost of goods Sold Note 1 First-in-First-out (FIFO)             6,540                          23,340 Note 2 Last-in-First-out LIFO)             5,040                          24,840 Note 3 Average Cost             5,783                          24,097 Ending Inventory Units = (1,240-1,000) = 240 units Note 1 First-in-First-out (FIFO):- Under this method, 1,000 units sold means under this method, 160 units of Jan,1 ,400 units of Mar 15, 250 units of July 20 and 190 units of Sept 4 must have been sold. Ending Inventory (330-190) Sept 4             140                                 26                        3,640 Dec 2             100                                 29                        2,900             240                        6,540 Cost of goods Sold Jan 1             160                                 20                        3,200 Mar 15             400                                 23                        9,200 July 20             250                                 24                        6,000 Sept 4             190                                 26                        4,940          1,000                      23,340 Note 2 Last-in-First-out LIFO):- Under this method, 1,000 units sold means 100 units of Dec,2 and 330 units of Sept,4, 250 units of July 20 and 320 units of Mar, 15 must have been sold Ending Inventory (400-320) Mar 15               80                                 23                        1,840 Jan,1             160                                 20                        3,200             240                        5,040 Cost of goods Sold Mar 15             320                                 23                        7,360 July 20             250                                 24                        6,000 Sept 4             330                                 26                        8,580 Dec 2             100                                 29                        2,900          1,000                      24,840 Note 3 Weighted average cost:- Ending inventory and cost of inventory sold will be calculated using Weighted average cost Average cost calculated above is 24.097 Hence, Ending Inventory is (240*24.097) = 5,783 And, Cost of goods Sold is (1,000 * 24.097) = 24,097 Part - (4) (1) FIFO method results in the highest inventory amount of $6,540 (2) LIFO method results in highest Cost of goods sold amount of $24,840

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