Causwell Company began 2021 with 23,000 units of inventory on hand. The cost of each unit was $5.00. During 2021 an additional 40,000 units were purchased at a single unit cost, and 33,000 units remained on hand at the end of 2021 (30,000 units therefore were sold during 2021). Causwell uses a periodic inventory system. Cost of goods sold for 2021, applying the average cost method, is $174,000. The company is interested in determining what cost of goods sold would have been if the FIFO or LIFO methods were used.

(1) 158,820

(2) 187,800

Explanation:

Per Unit Average Cost:

= Cost of Goods Sold with Average Cost : Total Units Sold

= 174,000 : 30,000

= 5.80

Cost of Goods Available for Sales:

= (Total of Inventory + Purchased Units) * Per Unit Average Cost

= 63,000 * 5.80

= 365,400

Cost of Units Purchased in 2021:

= Cost of Goods Available for Sale - Opening Inventory * Unit Cost

= 365,400 - 23,000 * 5

= 250,400

Per Units Cost of Units Purchased in 2021:

= Cost of Units Purchased in 2021 : Total Units Purchased

= 250,400 : 40,000

= 6.26

Part 1:

Cost of Goods Sold - FIFO

Cost of Goods Sold:

= (Opening Inventory * Unit Cost) + (40,000 - 33,000) * Per Units Cost of Units Purchased in 2021

= 23,000 * 5 + 7,000 * 6.26

= 158,820

Part 2:

Cost of Goods Sold - LIFO

Cost of Goods Sold:

= Units sold in 2021 * Per Units Cost of Units Purchased in 2021

= 30,000 * 6.26

= 187,800