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At the end of January, Higgins Data Systems had an inventory of 600 units, which cost $16 per unit to produce
At the end of January, Higgins Data Systems had an inventory of 600 units, which cost $16 per unit to produce. During February the company produced 850 units at a cost of $19 per unit. If Higgins sold 1,100 units in February, what was its cost of goods sold?
a. Assume average cost inventory accounting. (Do not round intermediate calculations. Round your answers to nearest whole dollar.)
Cost of goods sold $
b. Assume FIFO inventory accounting.
Cost of goods sold $
Expert Solution
Computation of Cost of Goods Sold using Average Cost Inventory Accounting:
Cost of Beginning Inventory = 600 Units * $16 = $9,600
Cost of Units produced = 850 units * $19 = $16,150
Cost of Goods available for Sale = Cost of Beginning Inventory + Cost of Units produced
= $9,600+$16,150
Cost of Goods available for Sale = $25,750
Units available for Sale = 600 units + 850 units = 1,450 units
Average Cost per unit = Cost of Goods available for Sale /Units available for Sale
= $25,750 / 1,450
Average Cost per unit = $17.76 per unit
Cost of Goods sold = Average Cost per unit * Units sold
= $17.76 * 1,100
Cost of Goods sold = $19,534.48
b. Computation of Cost of Goods Sold using FIFO Inventory Accounting:
Units sold = 1,100 Units
Cost of Goods sold = (600 Units * $16) + (500 * $19)
Cost of Goods sold = $9,600+$9,500
Cost of Goods sold = $19,100
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