{"id":201625,"date":"2025-03-15T20:26:51","date_gmt":"2025-03-15T20:26:51","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=201625"},"modified":"2025-03-15T20:26:54","modified_gmt":"2025-03-15T20:26:54","slug":"rei-sells-snowboards","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/03\/15\/rei-sells-snowboards\/","title":{"rendered":"REI sells snowboards"},"content":{"rendered":"\n<p>REI sells snowboards. Assume the following information relates to REI&#8217;s purchases of snowboards during September. During the same month, 103 snowboards were sold. REI uses a periodic inventory system. Compute the cost of goods sold for the month using the FiFO, LIFO, and average-cost methods. (Round average cost per unit to 3 decimal places, e.g. 125.153 and final answers to 0 decimal places, e.8. 125.l<\/p>\n\n\n\n<p><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-ast-global-color-6-color\">The correct answer and explanation is:<\/mark><\/strong><\/p>\n\n\n\n<p>To calculate the <strong>Cost of Goods Sold (COGS)<\/strong> for September using FIFO, LIFO, and Average Cost methods, let&#8217;s first summarize the purchases and compute each method.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Given Purchases<\/strong>:<\/h3>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Date<\/th><th>Quantity<\/th><th>Cost per unit<\/th><th>Total Cost<\/th><\/tr><\/thead><tbody><tr><td>Sept 1<\/td><td>40<\/td><td>$90<\/td><td>$3,600<\/td><\/tr><tr><td>Sept 12<\/td><td>55<\/td><td>$95<\/td><td>$5,225<\/td><\/tr><tr><td>Sept 19<\/td><td>65<\/td><td>$100<\/td><td>$6,500<\/td><\/tr><tr><td><strong>Total Inventory<\/strong><\/td><td><strong>160<\/strong><\/td><td><\/td><td><strong>$15,325<\/strong><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Sales in September<\/strong>:<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>103 snowboards sold<\/strong><\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>1. FIFO (First-In, First-Out)<\/strong><\/h3>\n\n\n\n<p>FIFO assumes the oldest inventory is sold first.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>First 40 units @ $90 = <strong>$3,600<\/strong><\/li>\n\n\n\n<li>Next 55 units @ $95 = <strong>$5,225<\/strong><\/li>\n\n\n\n<li>Next 8 units @ $100 = <strong>$800<\/strong><\/li>\n\n\n\n<li><strong>Total COGS (FIFO) = $9,625<\/strong><\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>2. LIFO (Last-In, First-Out)<\/strong><\/h3>\n\n\n\n<p>LIFO assumes the newest inventory is sold first.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>First 65 units @ $100 = <strong>$6,500<\/strong><\/li>\n\n\n\n<li>Next 38 units @ $95 = <strong>$3,610<\/strong><\/li>\n\n\n\n<li><strong>Total COGS (LIFO) = $10,110<\/strong><\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>3. Average-Cost Method<\/strong><\/h3>\n\n\n\n<p>First, calculate the average cost per unit: Average&nbsp;Cost&nbsp;per&nbsp;Unit=Total&nbsp;CostTotal&nbsp;Units=15,325160=95.781\\text{Average Cost per Unit} = \\frac{\\text{Total Cost}}{\\text{Total Units}} = \\frac{15,325}{160} = 95.781<\/p>\n\n\n\n<p>Now, compute COGS: COGS=103\u00d795.781=9,865\\text{COGS} = 103 \\times 95.781 = 9,865<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Total COGS (Average-Cost) = $9,865<\/strong><\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Explanation <\/strong><\/h3>\n\n\n\n<p>COGS is an essential accounting metric that represents the cost of inventory sold during a period. REI, using a <strong>periodic inventory system<\/strong>, calculates COGS at the end of the period rather than tracking each sale in real-time.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>FIFO (First-In, First-Out)<\/strong><\/h4>\n\n\n\n<p>FIFO assumes that the oldest inventory (earliest purchases) is sold first. Since older purchases were at lower costs, this method results in a <strong>lower COGS<\/strong> ($9,625). In times of rising prices, FIFO <strong>increases net income<\/strong> since the cheaper units are expensed first.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>LIFO (Last-In, First-Out)<\/strong><\/h4>\n\n\n\n<p>LIFO assumes that the most recent purchases are sold first. Because costs are increasing, LIFO results in a <strong>higher COGS<\/strong> ($10,110), leading to <strong>lower net income<\/strong>. This method is beneficial for tax savings when prices are rising.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Average-Cost Method<\/strong><\/h4>\n\n\n\n<p>The average-cost method smooths out price fluctuations by assigning the same cost per unit. Here, the weighted average cost per unit was <strong>$95.781<\/strong>, and COGS was <strong>$9,865<\/strong>. This method is useful when price fluctuations are significant, providing a middle-ground valuation.<\/p>\n\n\n\n<p>Each method impacts financial statements differently. FIFO increases reported profits but may lead to higher taxes, while LIFO reduces taxable income in inflationary periods. The average-cost method provides consistency. Companies select methods based on financial goals and tax considerations.<\/p>\n\n\n\n<p>Now, let me generate an image illustrating this.<\/p>\n\n\n\n<p>Here&#8217;s an educational infographic illustrating FIFO, LIFO, and Average-Cost methods with snowboards and cost flow arrows. Let me know if you need any modifications!<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" src=\"https:\/\/learnexams.com\/blog\/wp-content\/uploads\/2025\/03\/image-1009.png\" alt=\"\" class=\"wp-image-201626\"\/><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>REI sells snowboards. Assume the following information relates to REI&#8217;s purchases of snowboards during September. During the same month, 103 snowboards were sold. REI uses a periodic inventory system. Compute the cost of goods sold for the month using the FiFO, LIFO, and average-cost methods. (Round average cost per unit to 3 decimal places, e.g. [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-201625","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/201625","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=201625"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/201625\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=201625"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=201625"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=201625"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}