Question

Knowledge Check 01 Otis Corp. uses a periodic system and the FIFO method. Otis had beginning inventory of 30 units purchased at $120 each and made the following purchases during the year: Jan. 15: 34 units at $110 May 30: 61 units at $84 Oct. 20: 160 units at $60 Sales during the year totaled 271 units. What is the cost of ending inventory?

Answer 1

Answer:

$840

Explanation:

Data provided in the question:

Beginning inventory = 30 units      @ $120 each

Purchases during the year:

Jan. 15:  34 units at $110

May 30: 61 units at $84

Oct. 20: 160 units at $60

Sales during the year totaled 271 units

Now,

Total inventory before selling = 30 + 34 + 61 + 160 = 285

Inventory left after selling 271 units = 285 - 271 = 14 units

Now,

Under the FIFO method, the units purchased first will be sold first

Therefore,

The price of units left inventory will the price of units purchased last i.e $60

Hence,

The cost of ending inventory = 14 × $60

= $840