Calculate the average cost per book

Smith’s County Line Heating Supply purchased 10,000 gallons of heating oil for $18,825 from one supplier. The next day the company bought an additional 14,000 gallons from another supplier for $24,360. The company already had 8,250 gallons in inventory at a cost of $12,350 when it made these purchases. It did not make any sales in the time between the two purchases.

a. Calculate the value (at cost) of the company’s heating oil inventory immediately after these purchases, using LIFO.

b. Suppose that the company sold 16,000 gallons of heating oil from this inventory. Calculate the value (at cost) of the remaining inventory, using LIFO.

c. Suppose that the company then purchased 20,000 additional gallons of heating oil for $38,953. Calculate the value (at cost) of the company’s heating oil inventory after this purchase, using LIFO.

d. Suppose that the company sells 18,000 gallons from this inventory. Calculate the value (at cost) of the remaining inventory, using LIFO.

The bookstore at Northeastern Pennsylvania Community College purchased 153 copies of a biology textbook at a cost of $73.50 each. From enrollment figures, the bookstore realized that it did not have enough books, and so it rush ordered 80 additional copies at a cost of $98.35 each. This order arrived at the end of the first week of classes, at which time the bookstore had sold 120 copies of the book. At the end of the third week of classes, it had 27 copies of the book left in stock.

a. Calculate the value (at cost) of the inventory of this book at the end of the first week of classes, using LIFO.

b. Calculate the value (at cost) of the inventory of this book at the end of the third week of classes, using LIFO.

c. Calculate the average cost per book (i) at the end of the first week and (ii) at the end of the third week of classes, using LIFO.

Solution:

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