Instructions

a. Using periodic costing procedures, compute the cost of the December 31 inventory and the cost of

goods sold for the MP8 systems during the year under each of the following cost flow assumptions.

1. First-in, first-out.

2. Last-in, first-out.

3. Average cost (round to nearest dollar, except unit cost, and ignore small total rounding

difference).

b. Which of the three inventory pricing methods provides the most realistic balance sheet valu-

ation of inventory in light of the current replacement cost of the MP8 units? Does this same

method also produce the most realistic measure of income in light of the costs being incurred

by Clear Sound Audio to replace the MP8 systems when they are sold? Explain.