Question 3

Oak Tree Ltd. Inventory records for a particular development program show the following at October 31, 2016:

Oct 1	Beginning inventory	5 units @	$150 =	$750
15	Purchase	11 units @	160 =	1,760
26	Purchase	5 units @	170 =	850

At October 31, 10 units of these programs are on hand. Oak Tree Ltd. uses the perpetual inventory system.

1. Compute cost of goods sold and ending inventory, using each of the following methods:

• Specific unit cost, with two $150 units, three $160 units, and five $170 units still on hand at the

end.

• Weighted-average cost

First-in, first out cost

2. Which method produces the highest cost of goods sold? Which method produces the lowest cost

of goods sold? What causes the difference in cost of goods sold?