Memo
To: Fan Company A Partners
From: Andrew Wilcox
Date: 8/27/14
Re: Inventory Method Recommendation

After calculating your ending inventory values using the Periodic and perpetual FIFO, Periodic average, and Perpetual LIFO methods, the following conclusions can be made.
To calculate the Periodic FIFO ending inventory value, the total number of units sold is subtracted from the total number of units on hand at the beginning of the period plus the total number of units purchased during the period. This gives us an ending inventory of 900 units. Since this calculation is First In First Out, the 900 units are valued at the cost of the last shipment (1750 units at $58.25 each) and have an ending value of $52425.00
To calculate the Periodic Average ending inventory value, the number of items left at the end of the period is multiplied by the average cost. The average cost is found by taking the total cost of the items on hand at the beginning of the period plus the total cost of items purchased during the period and dividing that total by the total of the number of items on hand at the beginning of the period plus the total number of items purchased during the period. The 900 remaining items are then multiplied by this average cost to arrive at the ending inventory level. In this case, Average cost for the period is $631,037.50 divided by 11,675 to equal $54.05 per unit. 900 units remaining times $54.05 gives us the ending inventory total of $48,645.00.
The perpetual FIFO is a little more complicated. The inventory value changes with each purchase and each sale. Each time a sale is made, the cost of the first units purchased and available is attributed to the units of that sale. If the number of units sold is higher than the number of units purchased at a specific cost, the next cost is used. For example, in March, the 2150 units sold