Applying and Analyzing Inventory Costing Methods

At the beginning of the current period, Chen carried 3,000 units of its product with a unit cost of $20. A summary of purchases during the current period follows:

		Units	Unit Cost	Cost
Beginning Inventory		3,000	$20	$60,000
Purchases:	#1	5,400	22	118,800
	#2	2,400	26	62,400
	#3	3,600	29	104,400

During the current period, Chen sold 8,400 units.

a. Assume that Chen uses the first-in, first-out method. Compute its cost of goods sold for the current period and the ending inventory balance.

	Cost of Goods Sold	Answer
	Ending Inventory	Answer

b. Assume that Chen uses the last-in, rst-out method. Compute its cost of goods sold for the current period and the ending inventory balance.

	Cost of Goods Sold	Answer
	Ending Inventory	Answer

c. Assume that Chen uses the average cost method. Compute its cost of goods sold for the current period and the ending inventory balance.

Do not round intermediate calculations. Round final answers to the nearest whole dollar amount.

	Cost of Goods Sold	Answer
	Ending Inventory	Answer

d. Which of these three inventory costing methods would you choose to: 1. Reflect what is probably the physical flow of goods? AnswerAverage costFIFOLIFO 2. Minimize income taxes for the period? AnswerAverage costFIFOLIFO 3. Report the largest amount of income for the period? AnswerAverage costFIFOLIFO