Inventory Costing Methods

Tyler Company has the following information related to purchases and sales of one of its inventory items.

Date	Description	Units Purchased at Cost	Units Sold at Retail
Sept. 1	Beginning inventory	20 units @ $5
10	Purchase	30 units @ $8
20	Sales		40 units @ $15
25	Purchase	25 units at $10

Assume the company uses a perpetual inventory system.

Required:

Calculate ending inventory and cost of goods sold using the FIFO, LIFO, and average cost methods.

	FIFO	LIFO	Avg Cost
Cost of goods sold	$	$	$
Ending inventory	$	$	$

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Be sure to pay attention to whether the question asks for cost of goods sold or ending inventory. Apply the following steps:

Step 1. Calculate the cost of goods available for sale immediately prior to the sale transaction.

Step 2. Apply the inventory costing method recognizing that: Under FIFO, the earliest purchases (first in) are assumed to be the first sold (first out) and the more recent purchases are in ending inventory. Under LIFO, the most recent purchases (newest costs) are allocated to cost of goods sold and the earliest purchases (oldest costs) are allocated to ending inventory. Under Average cost, the cost of goods available for sale is allocated between ending inventory and cost of goods sold based on a weighted average cost of the goods available for sale.

Step 3. Repeat the first two steps for all inventory transactions during the period.