Samuelson and Messenger (S&M) began 2018 with 300 units of its one product. These units were purchased near the end of 2017 for $22 each. During the month of January, 200 units were purchased on January 8 for $25 each and another 260 units were purchased on January 19 for $27 each. Sales of 190 units and 200 units were made on January 10 and January 25, respectively. There were 370 units on hand at the end of the month. S&M uses a periodic inventory system.

Required:

1. Calculate ending inventory and cost of goods sold for January using FIFO.

2. Calculate ending inventory and cost of goods sold for January using average cost.

1. ending inventory $9,770 and cost of goods sold $8,850

2.ending inventory  $9,135.30 and cost of goods sold $9,346

Explanation:

FIFO Inventory System Sells the Older Inventory Acquired First Followed by the Recent Acquired Inventory

Cost of Sale :

10 January    (190 units × $22) = $4,180

25 January  : (110 units × $22) = $2,420

                      (90 units × $25) = $2,250

Total                                          = $8,850

Inventory :

110 units × $ 25  = $2,750

260 units × $27 = $7,020

Total                   = $9,770

Weighted Average Cost Method Calculates a New Cost of Inventory with each purchase made

New Cost 8 January

Unit Cost = Total Cost / Total Number of Units

                =((300 units × $22) + (200 units × $ 25)) / (300 units + 200 units)

                = $23.20

New Cost 19 January

Unit Cost = Total Cost / Total Number of Units

              =((310 units × $23.20) + (200 units × $ 27)) / (310 units + 200 units)

              = $24.69

Cost of Sale :

10 January    (190 units × $23.20)   = $4,408

25 January  : (200 units × $24.69) = $4,938

Total                                                  = $9,346

Inventory :

370 units × $24.69 = $9,135.30

A. a theory that tells us that exchange rates between currencies are in equilibrium when their purchasing power is the same in both countries.

Explanation:

PPP allows the comparison of price of a basket of goods between countries. An exchange rate determined by PPP is the amount of money to buy the same products from 2 different countries, which will be in equilibrium when this rate makes no different for buying the same basket of goods.