The following information relates to the inventory of Margaret’s Megamart Ltd during December. Ignore GST.   Date   Units Units cost Total cost 1/12 Beginning inventory 700 $ 12.00 $ 8,400 10/12 Purchase 500 12.60 6,300 15/12 Purchase 300 13.20 3,960 23/12 Purchase 500 14.00 7,000   Totals 2,000   $25,660   Margaret’s Megamart Ltd uses the periodic inventory system. A physical count on 31 December verified that 650 units were on hand.   Required: Determine the Ending inventory and Cost of Sales for the month of December, using the FIFO costing method.  Determine the Ending inventory and Cost of Sales for the month of December, using the weighted average costing method.  Which cost flow method(s) resulted in higher gross profit on sales? a higher ending inventory? Explain your results.

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A:

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Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.