Inventory Example 1

Perpetual or periodic system with LIFO, FIFO and average cost flow assump

Information for the month of January

units cost per unit
Beginning inventory 200 7 1,400
Purchases
8-Jan 1100 8 8,800
25-Jan 300 9 2,700
30-Jan 400 10 4,000

January ending inv 700

Sales
6-Jan 100
9-Jan 200
15-Jan 400
27-Jan 600

1. FIFO periodic method

Ending inventory cost
Cost of Goods sold

CGS=

2. LIFO periodic
Ending inventory cost
Cost of Goods sold

700 units
 0

CGS=

3. FIFO perpetual
Ending inventory cost
Cost of Goods sold

6-Jan
9-Jan

15-Jan
27-Jan CGS = 0

Ending inventory

4. LIFO perpetual
6-Jan
9-Jan
15-Jan
27-Jan
CGS 0

Ending inventory

5. Average periodic (weighted average)

first, calculate:
total cost/(number of units) = average cost per unit

is average cost per unit

second, use average cost per unit for CGS and EI

#units sold = units available -ending inventory
#units sold =
CGS = #units sold * average cost per unit
 EI=goods available -cgs

Ending inventory cost

Cost of Goods sold

6. Average Perpetual
average perpetual is sometimes referred to as a moving average
with average cost recalculated after every purchase
CGS Inventory Cost
Begin 1-Jan 200 7 1,400
-sale 6-Jan 100 7 700 700
+purchase 8-Jan 1100 8 9,500
recalculate average cost 7.92

-sale 9-Jan 200 7.92 1584 7,916

-sale 15-Jan 400 7.92 3,168 4,748
+purchase 25-Jan 300 9 7,448
recalculate average cost
-sale 27-Jan 600 8.28 2,480
+purchase 30-Jan 400 10 6,480
recalculate average cost

CGS
EI
ost flow assumptions
ng average

units left
200
100
1200

1000
600
900

300
700