Problem
Oak Tree Ltd. Inventory records for a particular development program show the following at October 31, 2016:
Oct 1 15 26
Beginning inventory Purchase
Purchase 10 units @ 60 units @ 70 units @
$0.60 = $6 0.65 = 39 0.70 = 49
At October 30, sold 120 units of these programs. Oak Tree Ltd. uses the perpetual inventory system.
Compute cost of goods sold and ending inventory, using each of the following methods:
a) Specific unit cost.
b) Weighted-average cost
c) First-in, first out cost
Which method produces the highest cost of goods sold? Which method produces the lowest cost of goods sold? What causes the difference in cost of goods sold?