Inventory cost flow assumptions
Watkins Corporation began operations on January 1, 2010. The 2010 and 2011 schedules of inventory purchases and sales are as follows:
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2010: |
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|
Purchase 1 |
10 units @ $10 per unit |
$100 |
|
Purchase 2 |
20 units @ $12 per unit |
240 |
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Total purchase costs |
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|
Sales |
15 units @ $30 per units |
$450 |
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2011: |
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|
Purchase 1 |
10 units @ $13 per units |
$130 |
|
Purchase 2 |
15 units @ $15 per units |
225 |
|
Total purchase costs |
$355 |
|
|
Sales |
20 units @ $35 per units |
$700 |
Complete the following schedule, and briefly discuss the trade-offs associated with choosing an inventory cost flow assumption.
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2010 |
FIFO |
Weighted Average |
LIFO |
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Cost of goods sold |
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Gross profit (Sales – COGS) |
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Ending inventory |
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|
2011 |
FIFO |
Weighted Average |
LIFO |
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Cost of goods sold |
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|
Gross profit (Sales – COGS) |
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Ending inventory |