Problem
GGG Pty Ltd in accordance with organisational policy, procedures and practices uses a periodic inventory system and values its inventory using FIFO. GGG had the following records during the month of September:
|
Date
|
Description
|
Units
|
Unit Cost
|
Total Cost
|
|
Sept 1
|
Beginning inventory
|
5,000
|
$2.00
|
$10,000
|
|
Sept 13
|
Inventory purchased
|
8,000
|
$2.40
|
$19,200
|
|
Sept 21
|
Inventory purchased
|
7,000
|
$2.60
|
$18,200
|
|
Total
|
|
20,000
|
|
$47,400
|
GGG sold 14,000 units during the month.
Task
1) Calculate inventory on 30th September and COGS for the month using each of the following inventory costing methods:
a) FIFO method (show your workings):
b) Weighted average cost method (show your workings):
2) Which method of inventory valuation has generated the lowest COGS for the month and what is the difference in COGS between the two inventory valuation methods?