Chapter 6 Workout Problems – Part B
Exceptional Electronics’ inventory records indicate the following for a line of webcams that is one of the
company’s best-selling products:
Quantity
Unit Cost
Beginning Inventory
50
$65
Purchases during the year
250
$85
Sold during year
275
Goods available for sale (units) = 50 + 250 = 300
Ending inventory (units) = 50 + 250 -275 = 25
1. Using the FIFO method, compute the cost of goods sold and ending inventory for the year.
FIFO cost of goods sold: There were 275 units sold. Under the FIFO, we assume that 50 of the sold
units were from beginning inventory and the other 225 were from purchases.
FIFO cost of goods sold = 50*65 + 225*85 = 3,250 + 19,125 = $22,375
FIFO ending inventory: Ending units = 50 + 250 – 275 = 25 units. Under FIFO, we assume that all
25 of these units came from purchases during the year.
FIFO ending inventory = 25*85 = $2,125
2. Using the LIFO method, compute the cost of goods sold and ending inventory for the year.
LIFO cost of goods sold: There were 275 units sold. Under the LIFO, we assume that 250 of the sold
units were from purchases and the other 25 were from beginning inventory.
LIFO cost of goods sold = 250*85 + 25*65 = 21,250 + 1,625 = $22,875
LIFO ending inventory: Ending units = 50 + 250 – 275 = 25 units. Under LIFO, we assume that all
25 of these units came from beginning inventory.
LIFO ending inventory = 25*65 = $1,625
3. Using the average-cost method, compute the cost of goods sold and ending inventory for the year.
Cost of Goods available for sale: 50*65 + 250*85 = 3,250 + 21,250 = 24,500
Average cost of goods available for sale: 24,500 / 300 = $81.67 per unit
Average-cost method cost of goods sold: 275 * 81.67 = $22,458
Average-cost method ending inventory: 25 * 81.67 = $2,042
