Erie Jewelers sells gold earrings. Its beginning inventory of Model 407 gold earrings

Erie Jewelers sells gold earrings. Its beginning inventory of Model 407 gold earrings consisted of 100 pairs of earrings at $50 per pair. Erie purchased two batches of Model 407 earrings during the year. The first batch purchased consisted of 150 pairs at $53 per pair; the second batch consisted of 200 pairs at $56 per pair. During the year, Erie sold 375 pairs of Model 407 earrings.

Required

Determine the amount of product cost Erie would allocate to cost of goods sold and ending inventory assuming that Erie uses (a) FIFO, (b) LIFO, and (c) weighted average.

Solution to Requirements a–c

Goods Available for Sale	Pairs	Cost per Pair	Total Cost
Beginning inventory	100	@ $50	= $5,000
First purchase	150	@ $53	= $7,950
Second purchase	200	@ $56	= $11,200
Total Goods Available for Sale	450		$24,150

a). FIFO

Cost of Goods Sold	Pairs	Cost per Pair	Total Cost
From beginning inventory	100	@ $50	= $5,000
From first purchase	150	@ $53	= $7,950
From second purchase	125	@ $56	= $7,000
Total pairs sold	375		$19,950

Ending inventory = Goods available for sale − Cost of goods sold

Ending inventory = $24,150 − $19,950 = $4,200

b). LIFO

Cost of Goods Sold	Pairs	Cost per Pair	Total Cost
From second purchase	200	@ $56	= $11,200
From first purchase	150	@ $53	= $7,950
From beginning inventory	25	@ $50	= $1,250
Total pairs sold	375		$20,400

Ending inventory = Goods available for sale − Cost of goods sold

Ending inventory = $24,150 − $20,400 = $3,750

c). Weighted average

Goods available for sale ÷ Total pairs = Cost per pair

$24,150 ÷ 450 = $53.6667

Cost of goods sold 375 units @ $53.6667 = $20,125

Ending inventory 75 units @ $53.6667 = $4,025

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Erie Jewelers sells gold earrings. Its beginning inventory of Model 407 gold earrings

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