Question

Inventory records for Marvin Company revealed that following :a.Mar 1. Beginning Inventory 1,000 units $7.20b.Mar. 10 Purchase 600 units $7.25c.Mar. 16 Purchase 800 units $7.30d.Mar. 23 Purchase 600 units $7.35Marvin sold 2300 units of inventory during this month . Ending Inventory assuming LIFO would be

Answer 1

Answer:

$5,040

Explanation:

LIFO is better matching with Cost, Sales and Revenue when we have increase in prices. In this example we have been given we can see that the prices are rising as well.

To calculate the Ending Inventory let us first calculate our Cost of Goods Sold (COGS):

So when we are talking about LIFO the very recent units we have purchased goes into the COGS. So if Marvin Company has sold 2,300 units during the period, we can calculate the COGS of 2,300 units as follows;

Mar 23: 600 x $7.35 = $4,410

Mar 16: 800 x $7.30 = $5,840

Mar 10: 600 x $7.25 = $4,350

Now all of the above accumulate to 2,000 units. But Marvin Company has sold 2,300 units. So we are short of 300 units in order to find the COGS of 2,300 units. For that we are going to take 300 units from our beginning inventory.

Mar 1: 300 x $7.20 = $2,160

Hence,

COGS = $4,410 + $5,840 + $4,350 + $2,160

COGS = $16,760

The remaining 700 units will go into the Ending Inventory and can be calculated as follows:

Ending Inventory = 700 x $7.20

Ending Inventory = $5,040