The Arcadia Company is uncertain whether it should utilize the first-in, first-out (FIFO) method, the last-in, first-out (LIFO) method, or the weighted-average method to account for its inventory. The company’s controller decided that she would compare the financial results under the three approaches as a way to reach a decision regarding which method to adopt. Data for the first two months of operations were as follows:

Required

a. Calculate the cost of goods sold for January and February for The Arcadia Company using FIFO, LIFO, and weighted-average methods.

b. Assume that revenue for the two-month period totaled \($300,000\). What inventory valuation method would you recommend that the company adopt? Why?

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January Units Unit Cost Total Beginning inventory.. 6,000 $2.00 $ 12,000 Purchases: Jan. 5 10,300 2.00 Jan. 20 29,300 2.10 20,600 61,530 $ 94,130 Sales: Jan. 25 38,400 February Beginning inventory.. 7,200 Purchases: Feb. 8 28,200 2.20 $ 62,040 Feb. 23 15,300 2.60 39,780 Sales: Feb. 27 40,700 Ending inventory... 10,000 $101,820