Question

FIFO and LIFO Costs Under Perpetual Inventory SystemThe following units of a particular item were available for sale during the year:Inventory | 36 units @ $400Sale | 24 units @ $1,000First Purchase | 80 units @ $420Sale | 60 units @ 1,000Second Purchase | 75 units @ $440Sale | 55 units @ $1,000The firm uses the perpetual inventory system, and there are 52 units of the item on hand at the end of the year.
a. What is the total cost of the ending inventory according to FIFO?b. What is the total cost of the ending inventory according to LIFO?

Answer 1

Answer:

FIFO - $22,880

LIFO - $21,120

Explanation:

The FIFO inventory system means first in, first out. It means the initial inventory is the first to be sold. The ending inventory would consist of the last purchased inventory.

Ending inventory = 52 ×$440 = $22,880.

The LIFO inventory system means last in, first out. It means the last purchased inventory are the first to be sold . The ending inventory would consist of the initial inventories.

Ending inventory = (36 units × $400) + [(52-36) × 420] =$14,400 + $6,720 = $21,120

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