The Alpha merchandising company purchases product DX-5 directly from manufacturers and sell it to small retailers as well as customers. The following transactions occurred during the first month of  2013:

Jan. 01 800 units of product DX-5 were on hand @ $40 each.
Jan. 08 600 units of product DX-5 were sold @ $76 each.
Jan. 14 1,200 units of product DX-5 were purchased @ $50 each.
Jan. 18 1,080 units of product DX-5 were sold @ $76 each.
Jan. 30 800 units of product DX-5 were purchased @ $60 each.

Required:

  1. Assuming the Alpha merchandising company uses periodic inventory method, compute the cost of inventory on hand at January 31, 2013 under the following cost flow assumptions:
    (a). First in, first out (FIFO)
    (b). Last in, first out (LIFO)
  2. Assuming the Alpha merchandising company uses a perpetual inventory method, compute the cost of inventory on hand at January 31, 2013 under the following cost flow assumptions:
    (a). First in, first out (FIFO)
    (b). Last in, first out (LIFO)

Solution:

(1) Periodic inventory method:

No. of units on January 31, 2013 = [(800 + 1,200 + 800) – (600 + 1,080)]

= 2,800 + 1,680

= 1,120 units

(a). FIFO method:

800 units @ $60 $48,000
320 units @ $50 $16,000
———–
The cost of ending inventory under periodic-FIFO $64,000
———–

(b). LIFO method:

800 units @ $40 $32,000
320 units @ $50 $16,000
———–
The cost of ending inventory under periodic-LIFO $48,000
———–

(2). Perpetual inventory method:

(a). FIFO method:

320 units @ $50 $16,000
800 units @ $60 $48,000
———–
The cost of ending inventory under perpetual-FIFO $64,000
———–

(b). LIFO method:

200 units @ $40 $8,000
120 units @ $50 $6,000
800 units @ $60 $48,000
———–
The cost of ending inventory under perpetual-LIFO $62,000
———–