Item Alpha Units Cost
Feb. 9 Purchase 1 $ 40
17 Purchase 1 42
26 Purchase 1 44
Total 3 $126
Average cost per unit $ 42 ($126 ÷ 3 units)
Assume that one unit is sold on February 28 for $75. Determine the gross profit for February and ending inventory on February 28 using the (a) first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) weighted average cost methods.
Answer:
a. First-in, first-out (FIFO)
b. Last-in, first-out (LIFO)
c. Weighted average cost
Gross Profit
February
$35 ($75 – $40)
$31 ($75 – $44)
$33 ($75 – $42)
Ending Inventory
February 28
$86 ($42 + $44)
$82 ($40 + $42)
$84 ($42 × 2)