Canfield uses a perpetual inventory system. The company’s beginning inventory of a particular product and its purchases during the month of January were as follows:

Quantity Unit Cost Total Cost
Beginning inventory (Jan. 1) 50 $6 $300
Purchase (Jan. 10) 25 7 175
Purchase (Jan. 22) 25 8 200
Total 100 $675

On January 25, Canfield sells 55 units of this product. The other 45 units remain in inventory at January 31.

A Determine the cost of goods sold using each of the following flow assumptions:

(1) LIFO $_____________



(2) FIFO $_____________



(3) Average cost $_____________

We can't just answer the question for you, but we can offer you a little bit of help.

First - LIFO. Last in, first out. What does that mean? LIFO means when you start sellng products, you sell the product you most recently bought first.

FIFO - First in, first out. When you start selling products, you sell the product you first bought.

Average cost take the average of all the prices you paid, and uses that as the COGS.

Think about it with milk at the grocery store, all lined up in a row. With LIFO, you're taking the jugs of milk from the front of the row, because the last jug in, is the first one out. With FIFO, you're taking the jugs of milk from the back of the row, because the first jug put in the row, is the first one out. Average cost means you're taking it from the middle.

So for your question above, for LIFO, you need to figure out which products came in most recently, how much they cost, and how many were sold. For FIFO, figure out which products came in first, how much they cost, and how many were sold. For weighted average, find the average cost of each product purchase, and use that number as your base.