Cost Flow methods – Exercise 1

Accounting for

COGS

Inventory

Specific Identification

?

?

FIFO

Weighted average cost

LIFO

Task: A company buys and sells one model of personal computers. Calculate the company’s Cogs, beginning and ending inventory if you know that it purchased:

3 PCs at $350 – December 1^st 2017

4 PCs at $400 – December 8^th 2017

5 PCs at $500 – December 21^st 2017

​

The company sold two PCs on 10^th of December and another two on the 22^nd of December. The first two PCs it sold were purchased on the 1^st of December, while the second two on the 8^th of December.

?

?

?

?

?

?

Cost Flow methods – Exercise 2

Accounting for

COGS

Inventory

Specific Identification

?

?

FIFO

Weighted average cost

LIFO

Task: Carry out the same calculation for an updated price of the PCs purchased on the 21^st of December

3 PCs at $350 – December 1^st 2017

4 PCs at $400 – December 8^th 2017

5 PCs at $600 – December 21^st 2017

​

Compare the different methods and the way they are impacted by increasing prices

​

The company sold two PCs on 10^th of December and another two on the 22^nd of December. The first two PCs it sold were purchased on the 1^st of December, while the second two on the 8^th of December.

?

?

?

?

?

?

Cost Flow methods – Solution Exercise 1

Accounting for

COGS

Inventory

Specific Identification

2x$350 + 2x$400 = $1,500

1x$350 + 2x$400 + 5x$500=

$3,650

FIFO

Weighted average cost

LIFO

3x$350 + 1x$400 = $1,450

2* (3*$350+4*$400)/7 = $757 (10^th Dec)

2* (3*$350+4*$400+5*$500)-$757/(12-2) =$879 (21^st Dec)

2 x $400 + 2*500 = $1,800

3x$400 + 5x$500=

$3,700

3*$350+4*$400+5*$500 – $757- $879 = $3,514

3x$350 + 3x$400 + 3x$500 = $3,350

Task: A company buys and sells one model of personal computers. Calculate the company’s Cogs, beginning and ending inventory if you know that it purchased:

3 PCs at $350 – December 1^st 2017

4 PCs at $400 – December 8^th 2017

5 PCs at $500 – December 21^st 2017

​

The company sold two PCs on 10^th of December and another two on the 22^nd of December. The first two PCs it sold were purchased on the 1^st of December, while the second two on the 15^th of December.

Cost Flow methods – Solution Exercise 2

Accounting for

COGS

Inventory

Specific Identification

2x$350 + 2x$400 = $1,500

​

1x$350 + 2x$400 + 5x$600=

$4,150

FIFO

Weighted average cost

LIFO

Task: Carry out the same calculation for an updated price of the PCs purchased on the 31^st of December

3 PCs at $350 – December 1^st 2017

4 PCs at $400 – December 15^th 2017

5 PCs at $600 – December 17^th 2017

​

Compare the different methods and the way they are impacted by increasing prices

​

The company sold two PCs on 10^th of December and another two on the 17^th of December. The first two PCs it sold were purchased on the 1^st of December, while the second two on the 15^th of December.

3x$350 + 1x$400 = $1,450

​

2* (3*$350+4*$400)/7 = $757 (10^th Dec)

2* (3*$350+4*$400+5*$600)-$757/(12-2) =$979 (21^st Dec)

​

2* $400 + 2*$600 = $2,000

3x$400 + 5x$600=

$4,200

​

3*$350+4*$400+5*$600 – $757- $979 = $3,914

​

3x$350 + 2x$400 + 3x$600 =

$3,650

​