Question

Chess Top uses the periodic inventory system. For the current month, the beginning inventory consisted of 360 units that cost $65 each. During the month, the company made two purchases: 540 units at $68 each and 270 units at $70 each. Chess Top also sold 900 units during the month. Using the LIFO method, what is the amount of cost of goods sold for the month?
(A) $60,786
(B) $58,500
(C) $61,470
(D) $60,120

Answer 1

Answer:

C. $61,470

Explanation:

The LIFO method operates under the assumption that the last item of inventory purchased is the first one sold. The cost of goods sold (for the 900 units sold) for the month will be computed as follows:

270 units sold at a unit cost of $70 (270 X 70)                          = $18,900

540 units sold at a unit cost of $68 (540 x 68)                          = $36,720

90 units (900 - 270- 540) sold at a unit cost of $65 (90 X 65) = $5,850

Total cost of goods sold  ($18,900 + $36,720 + $ 5,850)          = $61,470