Math  /  Data & Statistics

QuestionUrban Glam Cosmetics made sales on the following dates at a selling price of $36\$ 36 per unit: \begin{tabular}{|c|c|} \hline Jan. 10 & 74 units \\ \hline Mar. 15 & 220 units \\ \hline Oct. 5 & 490 units \\ \hline Totals & 784 units \\ \hline \end{tabular}
Required: The business uses a perpetual inventory system.
1. Determine the costs that should be assigned to the ending inventory and to goods sold under the following methods. (Do not round intermediate calculations. Round your final answers to 2 decimal places.) \begin{tabular}{|l|l|lr|l|} \hline & & Ending Inventory & \multicolumn{1}{|c|}{\begin{tabular}{c} Cost of Goods \\ Sold \end{tabular}} \\ \hline a. & FIFO & $\$ & 1,935.001,935.00 & $\$ \\ \hline b. & Movina weiahted average & & 8,089.008,089.00 \\ \hline \end{tabular}

Studdy Solution

STEP 1

1. The business uses a perpetual inventory system.
2. The FIFO (First-In, First-Out) method assumes the oldest inventory items are sold first.
3. The Moving Weighted Average method calculates a new average cost after each purchase.
4. The total units available for sale are 913 units.
5. The total units sold are 784 units.
6. The total cost of goods available for sale is $13,239.

STEP 2

1. Calculate the ending inventory and cost of goods sold using the FIFO method.
2. Calculate the ending inventory and cost of goods sold using the Moving Weighted Average method.

STEP 3

Calculate the ending inventory using FIFO:
- Beginning inventory: 83 units at 13.00eachPurchasesonMar.14:290unitsat13.00 each - Purchases on Mar. 14: 290 units at 14.00 each - Purchases on July 30: 540 units at $15.00 each
Units sold: 784 units
Remaining inventory after sales:
913 units available784 units sold=129 units remaining 913 \text{ units available} - 784 \text{ units sold} = 129 \text{ units remaining}

STEP 4

Determine the composition of the ending inventory using FIFO:
- The last 129 units are from the July 30 purchase at $15.00 each.
Calculate the cost of the ending inventory:
129 units×$15.00=$1,935.00 129 \text{ units} \times \$15.00 = \$1,935.00

STEP 5

Calculate the cost of goods sold using FIFO:
Total cost of goods available for sale: $13,239
Cost of ending inventory: $1,935
Cost of goods sold:
$13,239$1,935=$11,304 \$13,239 - \$1,935 = \$11,304

STEP 6

Calculate the ending inventory using the Moving Weighted Average method:
Calculate the weighted average cost after each purchase:
1. After beginning inventory: $13.00 \$13.00
2. After Mar. 14 purchase: \text{Weighted Average} = \frac{(83 \times 13) + (290 \times 14)}{83 + 290} = \frac{1079 + 4060}{373} = \$13.75 \]
3. After July 30 purchase: \text{Weighted Average} = \frac{(373 \times 13.75) + (540 \times 15)}{913} = \frac{5128.75 + 8100}{913} = \$14.50 \]

STEP 7

Calculate the ending inventory using the final weighted average cost:
Ending inventory: 129 units at $14.50 each
Cost of ending inventory:
129×14.50=$1,870.50 129 \times 14.50 = \$1,870.50

STEP 8

Calculate the cost of goods sold using the Moving Weighted Average method:
Total cost of goods available for sale: $13,239
Cost of ending inventory: $1,870.50
Cost of goods sold:
$13,239$1,870.50=$11,368.50 \$13,239 - \$1,870.50 = \$11,368.50
The costs assigned to the ending inventory and goods sold are:
- FIFO: Ending Inventory = \$1,935.00, Cost of Goods Sold = \$11,304.00 - Moving Weighted Average: Ending Inventory = \$1,870.50, Cost of Goods Sold = \$11,368.50

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