600 Chapter 15 Payroll and Inventory
from the original order. What was the value of their inventory of this particular saw when the new order arrived, using
the average cost method?- At the start of the month, a bakery had 800 pounds of premium cake fl our at a cost of $635. Later, the bakery placed
an order for 650 pounds of the same type of fl our at a cost of $472.50. When the new order arrived, the bakery had
250 pounds of this fl our left. At the end of the month, the bakery had 148 pounds of fl our left.
a. Calculate the value of their fl our inventory when the order arrived, using the average cost method.
b. Calculate the value of their fl our inventory at the end of the month, using the average cost method. - 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 they made these purchases. They did not make any sales in the
time between these two purchases.
a. Calculate the value (at cost) of the company’s heating oil inventory immediately after these purchases, using the
average cost method.
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 the average cost method.
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 the average cost method.
d. Suppose that the company sells 18,000 gallons from this inventory. Calculate the value (at cost) of the remaining
inventory, using the average cost method. - The bookstore at Northeastern Pennsylvania Community College purchased 153 copies of a biology textbook at a cost of
$73.50 each. From enrollment fi gures, 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 fi rst 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 fi rst week of classes, using the average
cost method.
b. Calculate the value (at cost) of the inventory of this book at the end of the third week of classes, using the average
cost method.
c. Calculate the average cost per book (i) at the end of the fi rst week and (ii) at the end of the third week of classes,
using the average cost method.
B. FIFO
- What does the acronym FIFO stand for?
- Burned Beans Coffee Shop ordered 85 pounds of Charred Roast coffee beans at a cost of $5.35 per pound. It placed
a new order for 57 pounds at $6.10 per pound. When the new order arrived, it had 28 pounds left from the original
order. Calculate the value of its inventory of this type of coffee bean, using FIFO. - Stassler Hardware ordered 25 model TJX-35 chain saws. The total cost of this order was $1,813. After a few weeks, the store
manager placed a new order for another 20 at a cost of $1,575. When this order arrived, the store had 8 saws left from the
original order. What was the value of its inventory of this particular saw when the new order arrived, based on FIFO?