The Kauai Surf Company sells high-end surfboards to tourists. The inventory is purchased from a manufacturer in Honolulu.
At the beginning of 2010, the company had 20 surfboards on hand which they had purchased at a cost of $50 each. During 2010, they purchased an additional 40 surfboards at a cost of $60 each on June 12 and another 70 surfboards at a cost of $80 each. At the end of the year, there were 30 unsold urfboards in ending inventory. The company uses the periodic method of inventory.
For each of the following inventory valuation methods, determine (a) the ending inventory value and (b) the cost of goods sold:
a) FIFO
b) LIFO
c) Weighted Average Cost
Amount in $
Answers: Units (a) cost price per unit (b) Total cost (a*b)
Opening inventory 20 50 1000
Purchased 40 60 2400
Purchased 70 80 5600
Total 130 9000
Less: Closing stock 30
Sales 100
a) Under FIFO
Computation of Cost of goods sold and closing inventory:
Amount in $
Units (a) cost price per unit (b) Total cost (a*b)
Cost of goods sold 20 50 1000
40 60 2400
40 80 3200
6600
Closing inventory 30 80 2400
b) Under LIFO
Computation of Cost of goods sold and closing inventory:
Amount in $
Units (a) cost price per unit (b) Total cost (a*b)
Cost of goods sold 70 80 5600
30 60 1800
7400
Closing inventory 10 60 600
20 50 1000
1600
c) Under Weighted average method
Computation of Cost of goods sold and closing inventory:
Amount in $
Units (a) cost price per unit (b) Total cost (a*b)
Opening inventory 20 50 1000
Purchased 40 60 2400
Purchased 70 80 5600
Total 130 9000
Therefore weighted average cost per unit =9000/130
69.23
Cost of goods sold =69.23*100 6,923.08
Closing inventory =69.23*30 2,076.92