Exercise 7-6

Compute cost of ending inventory using the FIFO, LIFO, and weighted-average under the periodic inventory procedure (L.O. 3)

Kettle Company made the following purchases of Product A in its first year of operations:

	Units		Units Cost
January 2	1,400	@	$7.40
March 31	1,200	@	7.00
July 5	2,400	@	7.60
November 1	1,800	@	8.00

The ending inventory that year consisted of 2,400 units. Kettle uses periodic inventory procedure.

a. Compute the cost of the ending inventory using each of the following methods: (1) FIFO, (2) LIFO, and (3) weighted-average.

b. Which method would yield the highest amount of gross margin? Explain why it does.