6-2B Savage Distribution markets CDs of the performing artist Little Sister. At the beginning of October, Savage had in beginning inventory 1,200 Sister's CDs with a unit cost of $5. During October, Savage made the following purchases of Sister's CDs.
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Oct. 3 4,000 @ $6
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Oct. 19 2,500 @ $8
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Oct. 9 3,000 @ $7
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Oct. 25 2,000 @ $9
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During October 9,400 units were sold. Savage uses a periodic inventory system.
Instructions:
[a] Determine the cost of goods available for sale.
[b] Determine (1) the ending inventory and (2) the cost of goods sold under each of the assumed cost flow methods (FIFP, LIFO, and average -cost). Prove the accuracy of the cost of goods sold under the FIFO and LIFO method. (Round cost per unit to three decimal places.)
[c] Which cost flow method results in (1) the highest inventory amount for the balance sheet and (2) the highest cost of goods sold for the income statement?