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Business Mathematics Brief 12th Edition by Stanley Salzman ,Gary Clendenen, Charles Miller
Edition 12ISBN: 978-0132605540Business Mathematics Brief 12th Edition by Stanley Salzman ,Gary Clendenen, Charles Miller
Edition 12ISBN: 978-0132605540 Exercise 93
Find the inventory values using (a) the weighted-average method, (b) the FIFO method, and (c) the LIFO method for each of the following. Round to the nearest cent if necessary. (See Examples.)
Using Weighted Average (Average Cost) Inventory Valuation
Suppose REI made the following purchases of the Explorer internal frame backpack during the year.
At the end of the year, there are 75 backpacks in inventory. Use the weighted-average method to find the inventory value.
Solution
Find the total cost of all the backpacks.
Find the average cost per backpack by dividing this total cost by the number purchased.
Since the average cost is $83.33 and 75 backpacks remain in inventory, the weighted-average method gives the inventory value of the remaining backpacks as $83.33 × 75 = $6249.75.
The calculator solution to this example has several steps. First, find the total number of backpacks purchased and place the total in memory.
Next, find the total cost of all the backpacks purchased and divide by the number stored in memory. This gives the average cost per backpack.
Finally, round the average cost to the nearest cent and multiply by the number of backpacks in inventory to get the weighted average inventory value.
Using FIFO to Determine Inventory Valuation
Use the FIFO method to find the inventory value of the 75 backpacks from REI in Example. Solution
CASE IN POINT With the FIFO method, the 75 remaining backpacks are assumed to consist of the 40 backpacks bought in October and 35 (75 ? 40 = 35) backpacks from the previous purchase in July. The value of the inventory is:
The value of the backpack inventory is $5975 using the FIFO method.
Using LIFO to Determine Inventory Valuation
Use the LIFO method to value the 75 backpacks in inventory at REI in Example.
Solution
CASE IN POINT The calculation starts with the beginning inventory and moves through the year's purchases, resulting in 75 backpacks still in stock. The beginning inventory and January purchases come to 70 backpacks, so the cost of 5 more (75 ? 70 = 5) backpacks from the March purchase is needed.
The value of the backpack inventory is $5850 using the LIFO method.
Using Weighted Average (Average Cost) Inventory Valuation Suppose REI made the following purchases of the Explorer internal frame backpack during the year.
At the end of the year, there are 75 backpacks in inventory. Use the weighted-average method to find the inventory value.
Solution
Find the total cost of all the backpacks.
Find the average cost per backpack by dividing this total cost by the number purchased.
Since the average cost is $83.33 and 75 backpacks remain in inventory, the weighted-average method gives the inventory value of the remaining backpacks as $83.33 × 75 = $6249.75.
The calculator solution to this example has several steps. First, find the total number of backpacks purchased and place the total in memory.
Next, find the total cost of all the backpacks purchased and divide by the number stored in memory. This gives the average cost per backpack.
Finally, round the average cost to the nearest cent and multiply by the number of backpacks in inventory to get the weighted average inventory value.
Using FIFO to Determine Inventory Valuation
Use the FIFO method to find the inventory value of the 75 backpacks from REI in Example. Solution
CASE IN POINT With the FIFO method, the 75 remaining backpacks are assumed to consist of the 40 backpacks bought in October and 35 (75 ? 40 = 35) backpacks from the previous purchase in July. The value of the inventory is:
The value of the backpack inventory is $5975 using the FIFO method.
Using LIFO to Determine Inventory Valuation
Use the LIFO method to value the 75 backpacks in inventory at REI in Example.
Solution
CASE IN POINT The calculation starts with the beginning inventory and moves through the year's purchases, resulting in 75 backpacks still in stock. The beginning inventory and January purchases come to 70 backpacks, so the cost of 5 more (75 ? 70 = 5) backpacks from the March purchase is needed.
The value of the backpack inventory is $5850 using the LIFO method.
Explanation
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Business Mathematics Brief 12th Edition by Stanley Salzman ,Gary Clendenen, Charles Miller
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