AC116 Unit 4 Inventory Costing Comparison Example

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One year of harvest bin purchases is costed three ways in this AC116 Unit 4 inventory costing comparison at Ridgeline, an invented supplier of tools and bins to fruit farms. Purdue Global AC 116, Accounting II, gives BS in Accounting students a worked proof that one set of purchases can yield three permitted profits. Ridgeline Orchard Supply's record runs from 200 bins at $62 to 250 at $71, with 1,150 available and 900 sold at $95. First in, first out leaves $17,750 in ending inventory and earns $26,400 of gross profit; last in, first out leaves $15,650 and earns $24,300; weighted average, at $66.8261 a bin, earns $25,357. A table compares all three, and the reading explains the price effect, the tax conformity rule, the net realizable value test and why consistent disclosure matters.

CourseAC116 Accounting II
UnitUnit 4
Paper typeInventory costing comparison
LengthAbout 590 words, 5 pages double-spaced
FormatAPA 7 student paper
SchoolPurdue University Global
ProgramBS in Accounting
UpdatedOctober 2026

Free sample paper for AC116 Unit 4

1

One Year of Harvest Bins, Three Cost Flows: A Unit 4 Inventory Costing Comparison for an Orchard Supply Distributor

[Student Name]

Purdue University Global

AC116: Accounting II

Unit 4 Inventory Costing Comparison

[Instructor Name]

[Date]

Ridgeline Orchard Supply, Inc., its purchases and prices are composite; the textbook, inventory standard and tax statute cited are real.

What this part is doingGiving all three profit figures and the method with the most income in the lead shows the comparison reaches its conclusion.
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Purchase Record

1. Beginning inventory, January 1: 200 bins at $62.00, $12,400.

2. March 4: 300 bins at $65.00, $19,500.

3. June 10: 400 bins at $68.00, $27,200.

4. August 22: 250 bins at $71.00, $17,750.

Cost of goods available for sale: 1,150 bins, $76,850. Bins sold during the year: 900 at $95.00, sales of $85,500. Bins on hand December 31: 250. Costs are assigned at year end under a periodic system.

First In, First Out

The 250 bins on hand are priced from the latest purchase: 250 at $71.00, $17,750. Cost of goods sold: $76,850 minus $17,750 equals $59,100. Check: 200 at $62.00 plus 300 at $65.00 plus 400 at $68.00 equals $12,400 plus $19,500 plus $27,200, or $59,100.

Last In, First Out

The 250 bins on hand are priced from the earliest layers: 200 at $62.00 plus 50 at $65.00, $12,400 plus $3,250, or $15,650. Cost of goods sold: $76,850 minus $15,650 equals $61,200.

Weighted Average

Average unit cost: $76,850 divided by 1,150 bins equals $66.8261. Ending inventory: 250 times $66.8261 equals $16,706.52, rounded to $16,707. Cost of goods sold: $76,850 minus $16,707 equals $60,143.

Comparison

1. Sales: $85,500 under every method.

2. Cost of goods sold: first in, first out $59,100; last in, first out $61,200; weighted average $60,143.

3. Gross profit: first in, first out $26,400; last in, first out $24,300; weighted average $25,357.

4. Ending inventory: first in, first out $17,750; last in, first out $15,650; weighted average $16,707.

With bin prices rising all year, first in, first out produces the most income because it sends the cheapest, oldest costs to cost of goods sold and leaves the newest costs on the balance sheet.

What this part is doingThe highlighted sentence names the method with the most income and explains why, the sentence the unit's comparison is built to reach.
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Reading the Differences

The total cost of $76,850 is the same in every case; the methods only divide it differently between what was sold and what remains (Franklin et al., 2019). The $2,100 gap between first in, first out and last in, first out is the price rise on the layers that each method treats as sold. Weighted average falls between the two.

Last in, first out matches recent costs against recent sales, which many argue gives a truer picture of current margins, but it leaves the oldest costs on the balance sheet. It also has a tax effect in the United States: the conformity rule lets a company claim it on the tax return only if the published statements use it too (Last-in, First-out Inventories, 2024). When prices climb, the smaller profit also shrinks taxable income, and that saving usually explains the choice.

Whatever the method, inventory valued under first in, first out or weighted average is later tested against net realizable value and written down if the bins could no longer be sold for their cost (Financial Accounting Standards Board, 2015). At $95.00 a bin, that test is not close for Ridgeline.

Recommendation

For a distributor whose bin prices have risen 15 percent in a year, the choice changes reported gross profit by up to 8 percent. Whichever method Ridgeline adopts, it should apply it consistently and state it in its accounting policy note so that lenders can compare its results with those of other distributors.

What this part is doingEnding with a practical recommendation turns the computation into advice, which strengthens a comparison assignment.
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References

Financial Accounting Standards Board. (2015). Inventory (Topic 330): Simplifying the measurement of inventory (Accounting Standards Update No. 2015-11). https://www.fasb.org

Franklin, M., Graybeal, P., & Cooper, D. (2019). Principles of accounting, volume 1: Financial accounting. OpenStax. https://openstax.org/details/books/principles-financial-accounting

Last-in, First-out Inventories, 26 U.S.C. ยง 472 (2024).

Reading the AC 116 Unit 4 instructions

The fourth AC116 unit supplies a purchase record and asks for cost of goods sold and ending inventory under several cost flow assumptions. Lay out the purchases once with units, unit costs and extended costs, and total the goods available. State units sold and units on hand. Then give each method its own block ending with two figures, ending inventory and cost of goods sold, and check that they add to goods available. Carry the weighted average unit cost to four decimals before multiplying, to avoid rounding drift. Finish with a comparison table showing sales, cost of goods sold, gross profit and ending inventory under each method, and a sentence naming the method with the most income and why. Most comparisons fill two pages. Cite the textbook and any standard or statute in APA 7.

Inside the AC116 Unit 4 example

The sample lists four layers of bins and totals $76,850 for 1,150 units, then states 900 sold for $85,500. The first in, first out block prices the 250 remaining bins at the August cost and checks cost of goods sold layer by layer. The last in, first out block prices them from the beginning layer and March. The weighted average block computes $66.8261 and rounds ending inventory to $16,707. A four-line comparison gives the three results. The highlighted sentence names first in, first out as the method with the most income under rising prices. Sections explain the $2,100 spread, the conformity rule for last in, first out, the net realizable value test and a recommendation on consistency and disclosure.

Where the points sit in the AC116 Unit 4 rubric

Inventory comparisons are graded on correct layers, correct arithmetic and a correct conclusion. Each block must reconcile to cost of goods available, and graders often check that first. Weighted average rounding should be handled consistently, ideally at four decimals. The comparison table and the closing sentence about which method reports the most income are commonly separate rubric items. Explaining why prices drive the result earns interpretation credit in AC116. Accurate mention of rules such as the conformity requirement or the lower of cost or net realizable value test adds strength. A clean layout helps graders follow the layers. Correct APA 7 citations finish the grade.

AC116 Unit 4 help from the desk

The most frequent costing error is pricing last in, first out ending inventory from the newest layers instead of the oldest. Others forget beginning inventory when totaling goods available. Weighted average is computed as a simple average of unit prices rather than total cost divided by total units. Ending inventory and cost of goods sold fail to sum to goods available. The comparison names a method without explaining the price trend behind it. Some students claim last in, first out is allowed internationally. If your purchase record is long and the layers keep shifting, a writer can cost it under each method from your problem.

Get an AC116 Unit 4 example written to your instructions

Unit 4's purchase record, with dates, units and unit costs, is the input that decides every number; include the section's instructions and rubric with it. All three methods come back costed on that record inside 24-48h, each block proved against goods available, and a first custom sample is free. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.

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AC116 Unit 4 questions, answered

Where does lower of cost or market fit into the comparison?

After the three blocks, in sections that include it. The chosen method's ending inventory is compared with its market figure, item by item or in total as the problem directs, and written down if market is lower. Most AC116 problems send the write-down to cost of goods sold, and the sample shows the comparison line before the entry so the amount can be traced.

Why does my weighted average figure differ slightly from the answer key?

Almost always rounding. A unit cost rounded to two decimals and then multiplied by several hundred units drifts by a few dollars. Carrying the unit cost to four places, or computing cost of goods sold as available cost minus ending inventory, removes most of the gap. The sample labels any remaining rounding so a grader can see it was deliberate.

Why does the comparison table include ending inventory?

Because the method that reports the most income under rising prices also leaves the most recent, highest costs on the balance sheet, and the course wants both effects named together. Last in, first out does the opposite, keeping old costs in inventory for as long as the layers survive. A table showing only gross profit tells half of what the unit is testing.

Where can I find a free AC116 Unit 4 sample paper?

The complete AC116 Unit 4 inventory costing comparison on this page costs a year of harvest bin purchases three ways, oldest layers first, newest layers first and at an average cost, with a comparison table.

Why is weighted average carried to four decimals in the AC116 Unit 4 sample?

The average cost of $66.8261 is multiplied by hundreds of units. Rounding it to two decimals first would shift ending inventory by a dollar or more and break the reconciliation.