PE 7-1B Cost flow methods

Three identical units of Item ZE9 are purchased during April, as shown below.

                         Item JC07       Units          Cost
Apr. 2                Purchase            1              $10
      12                Purchase            1                12
      23                Purchase            1                14
     Total                                       3               $36
Average cost per unit                                     $12 ($36 ÷ 3 units)

Assume that one unit is sold on April 27 for $29.
Determine the gross profit for April and ending inventory on April 30 using the
(a) first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) average cost methods.

Answer:
                                                 Gross Profit               Ending Inventory
                                                       July                               July 31
a. First-in, first-out (FIFO)        $19 ($29 – $10)               $26 ($12 + $14)
b. Last-in, first-out (LIFO)        $15 ($29 – $14)               $22 ($10 + $12)
c. Average cost                         $17 ($29 – $12)                 $24 ($12 × 2)