Applying and Analyzing Inventory Costing Methods

At the beginning of the current period, Chen carried $1,000$ units of its product with a unit cost of $$20.$ A summary of purchases during the current period follows. During the period, Chen sold $2,800$ units.

Ending inventory balance $

Cost of goods sold

Use negative signs with answers, when appropriate.

$($b$)$ Assume that Chen uses the last$-$in$,$ first$-$out method. Compute both cost of good sold for the current period and the ending inventory balance.

$($c$)$ Assume that Chen uses the average cost method. Compute both cost of good sold for the current period and the ending inventory balance.

Ending inventory balance $

Cost of goods sold $,$$

$($d$)$ Which of these three inventory costing methods would you choose to:

Reflect what is probably the physical flow of goods? LIFO oFIFO $$ Average Cost

Minimize income taxes for the period? OLIFO $$ FIFO Average Cost

Report the largest amount of income for the period? LIFO oFIFO $$ Average Cost