PE 7-5B Periodic inventory using FIFO, LIFO, and weighted average cost methods

The units of an item available for sale during the year were as follows:

Jan.  1 Inventory  20 units at $360 $   7,200

Aug. 13 Purchase 260 units at $342 88,920

Nov. 30 Purchase  40 units at $357 14,280

Available for sale 320 units $110,400

There are 57 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost using (a) the first-in, first-out (FIFO) method; (b) the last-in, first-out (LIFO) method; and (c) the weighted average cost method.

Answer:

a. First-in, first-out (FIFO) method: $20,094 = (40 units × $357) + (17 units × $342)

b. Last-in, first-out (LIFO) method: $19,854 = (20 units × $360) + (37 units × $342)

c. Weighted average cost method: $19,665 (57 units × $345), where average cost = $345 = $110,400 ÷ 320 units