Inventory Flow Assumptions
Flat TV Uses a Perpetual Inventory System

question 86

Essay

Inventory flow assumptions
Flat TV uses a perpetual inventory system. Shown below are Flat TV's beginning inventory of a particular product and purchases during January:
$$\begin{array} { | l | l | r | r | r | } \hline & & \text { Quantity } & \text { Unit Cost (\$) } & \text { Total Cost (\$) } \\\hline 1 \text { Jan } & \text { Beginning irventory } & 6 & 1,950 & 11,700 \\\hline \text { 6 Jan} & \text { Purchases } & 12 & 2,250 & 27,000 \\\hline \text { 25 Jan} & \text { Purchases } & \underline { 12 } & 2,300 & \underline { 27,600 } \\\hline & \text { Total } & \underline { 30 } & & \underline { 66,300 } \\\hline\end{array}$$ On 23 January (prior to the purchase on 25 January), Flat TV sold 13 units of this product.
Determine the cost of goods sold relating to the sale on 23 January under each of the following flow assumptions. (Show your computations.)
(a) FIFO $__________________
(b) Weighted average cost (or moving average) $______________

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Definitions:

Reasoning Errors

Mistakes or logical flaws in the process of drawing conclusions or making decisions.

Financial Decisions

Choices made by individuals or businesses regarding the management of money and assets.

Money Illusion

Money illusion occurs when people think of currency in nominal, rather than real, terms, failing to account for inflation's impact on purchasing power.

Real Buying Power

The amount of goods and services that can be purchased with a unit of currency, taking into account inflation to reflect the true value over time.