Page 292 - Accounting Principles (A Business Perspective)

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Units Unit Total
Cost Cost
Ending inventory composed of:
Beginning inventory 10 $8.00 $ 80
March 2 purchase 10 8.50 85
Ending inventory 20 $165
Cost of goods sold composed of purchases made on:
December 21 10 9.10 $ 91
October 12 20 8.80 176
August 12 10 9.00 90
May 28 20 8.40 168
$525
Cost of goods available for sale $690
Ending inventory 165
Cost of goods sold $525
Exhibit 53: Determining LIFO cost of ending inventory under periodic inventory procedure

Exhibit 54: LIFO flow of costs under periodic inventory procedure

Weighted-average under periodic inventory procedure The weighted-average method of inventory
costing is a means of costing ending inventory using a weighted-average unit cost. Companies most often use the

weighted-average method to determine a cost for units that are basically the same, such as identical games in a toy
store or identical electrical tools in a hardware store. Since the units are alike, firms can assign the same unit cost to
them.
Under periodic inventory procedure, a company determines the average cost at the end of the accounting period
by dividing the total units purchased plus those in beginning inventory into total cost of goods available for sale.
The ending inventory is carried at this per unit cost. To see how a company uses the weighted-average method to
determine inventory costs using periodic inventory procedure, look at Exhibit 55. Note that we compute weighted-
average cost per unit by dividing the cost of units available for sale, USD 690, by the total number of units available
for sale, 80. Thus, the weighted-average cost per unit is USD 8.625, meaning that each unit sold or remaining in

inventory is valued at USD 8.625.

Accounting Principles: A Business Perspective 293 A Global Text