Phoenix Ltd sells hard disks of similar make and model and reports an opening inventory on 1 July 2012 of 20 units purchased at $60.Its purchases during are as follows:
September 90 units @ $70
November 110 units @ $75
March 70 units @ $80
Phoenix Ltd sold 260 units during the year.
What is the cost of ending inventory using FIFO and weighted average method respectively (rounded to the nearest dollar)?
A) $2100; $2209
B) $2100; $2250
C) $2400; $2209
D) $2400; $2250

Question

Quizplus · Accepted Answer

Using FIFO method:
The cost of goods sold will be calculated as follows:
20 units @ $60 = $1200 
90 units @ $70 = $6300 
110 units @ $75 = $8250 
Total cost of goods sold = $15750
Therefore, the cost of ending inventory will be:
70 units @ $80 = $5600
Total cost of ending inventory = $5600
Using weighted average method:
The weighted average cost per unit will be calculated as follows:
(20 units x $60) + (90 units x $70) + (110 units x $75) + (70 units x $80) / 290 units = $73.45 (rounded to the nearest cent)
The cost of goods sold will be:
260 units x $73.45 = $19067 (rounded to the nearest dollar)
Therefore, the cost of ending inventory will be:
290 units - 260 units = 30 units
30 units x $73.45 = $2203.50 (rounded to the nearest dollar)
Hence, the best choice is option C as it provides the cost of ending inventory for both FIFO and weighted average method.

Phoenix Ltd Sells Hard Disks of Similar Make and Model