Question

Cortez Company sells chairs that are used at computer stations. Its beginning inventory of chairs was 240 units at $46 per unit. During the year, Cortez made two batch purchases of this chair. The first was a 310-unit purchase at $51 per unit; the second was a 375-unit purchase at $53 per unit. During the period, it sold 610 chairs. Required Determine the amount of product costs that would be allocated to cost of goods sold and ending inventory, assuming that Cortez uses FIFO.

Answer 1

Answer:

The correct answer for cost of goods sold is $30,030 and ending inventory is $16,695.

Explanation:

According to the scenario,the computation of the given data are as follows:

First we calculate the total cost of goods purchased.

Hence,

Beginning Inventory  = Total units × Rate

Where,  Total units = 240

Rate = $46 / unit

So, Beginning inventory = 240 × $46 = $11,040

First Purchase

Where,  Total units = 310

Rate = $51 / unit

So, First purchase = 310 × $51 = $15,810

Second Purchase

Where,  Total units = 375

Rate = $53 / unit

So, Second purchase = 375 × $53 = $19,875

Hence, Cost of Goods Available  = Beginning inventory + First purchase + Second purchase

= $11,040 + $15,810 + $19,875

= $46,725

So, we can calculate cost of goods sold using FIFO are as follows:

Total sold chairs = 610 units

So, Beginning inventory = Total units × Rate

Where,  Total units = 240

Rate = $46 / unit

So, Beginning inventory = 240 × $46 = $11,040

First Purchase

Where,  Total units = 310

Rate = $51 / unit

So, First purchase = 310 × $51 = $15,810

Second Purchase

Where,  Total units = 60

Rate = $53 / unit

So, Second purchase = 60 × $53 = $3,180

So, Cost of Goods sold  = Beginning inventory + First purchase + Second purchase

= $11,040 + $15,810 + $3,180

= $30,030

And Ending inventory = Cost of Goods Available - Cost of Goods sold

= $46,725 - $30,030

= $16,695