Question

The units of an item available for sale during the year were as follows: Jan. 1 Inventory 2,500 units at $5 Feb. 17 Purchase 3,300 units at $6 July 21 Purchase 3,000 units at $7 Nov. 23 Purchase 1,200 units at $8 There are 1,500 units of the item in the physical inventory at December 31. The periodic inventory system is used.
a. Determine the inventory cost by the first-in, first-out method. $
b. Determine the inventory cost by the last-in, first-out method. $
c. Determine the inventory cost by the weighted average cost method. $

Answer 1

Answer:

The answers are:

A) Using FIFO, the inventory cost is $11,700

B) Using LIFO, the inventory cost is $7,500

C) Using ACV, the inventory cost is $9,435

Explanation:

Date              Units purchased     Unit price         Total purchase

Jan. 1              2,500 units            $5 per unit           $12,500

Feb. 17            3,300 units            $6 per unit           $19,800

July 21            3,000 units            $7 per unit           $21,000

Nov. 23          1,200 units             $8 per unit           $9,600

TOTAL           10,000 units                                        $62,900

At December 31, 1,500 units were left in the physical inventory

• Using FIFO, the inventory cost is $11,700 [= (1,200 units x $8 per unit) + (300 units x $7 per unit)]
• Using LIFO, the inventory cost is $7,500 (= 1,500 units x $5 per unit)
• Using ACV, the inventory cost is $9,435 [= ($62,900 / 10,000 units) x 1,500 units]