The following merchandise inventory transactions occurred during the month of June for Heavy Metal Guitars (HMG): June

Question:

The following merchandise inventory transactions occurred during the month of June for Heavy Metal Guitars (HMG):

June 6Inventory on hand was 500 units at a cost of $100 each

June 11 Sold 100 units for $200 each

June 15 Purchased 200 units at $125 each

June 21 Sold 300 units for $225 each

June 27 Purchased 100 units for $75 each

Requirements

1. Assume HMG uses a periodic inventory system and compute the cost of goods sold for the month ended June 30 and ending inventory at June 30 using each of the following cost flow methods:

a. FIFO

b. LIFO

c. Weighted average cost

2. Using the information for item (1), calculate the inventory turnover ratio and average days in inventory for the month of June for each method.

3. Assume HMG uses the perpetual inventory system and compute the cost of goods sold for the month ended June 30 and ending inventory at June 30 using each of the following cost flow methods:

a. FIFO

b. LIFO

Inventory Turnover Ratio
Inventory Turnover RatioThe inventory turnover ratio is a ratio of cost of goods sold to its average inventory. It is measured in times with respect to the cost of goods sold in a year normally. Inventory Turnover Ratio FormulaWhere,... Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =...