Question

During June, the following changes in inventory item 27 took place: June 1 Balance 1,450 units @ $34 14 Purchased 890 units @ $55 24 Purchased 650 units @ $45 8 Sold 350 units @ $73 10 Sold 1,100 units @ $63 29 Sold 520 units @ $65 Perpetual inventories are maintained. What is the cost of the ending inventory for item 27 under the FIFO method.

Answer 1

Answer:

Opening inventory = 1,450 x  $34  = 49,300

Purchases               = 890   x $55    = 48,950

Purchases               = 650  x $45    = 29,250

Total                           2,990              127,500

Less:

Sales                          350 @ $34       11,900

Sales                          1,100 @ $34      37,400

Sales                             520 @ $55     28,600

Closing inventory     1,020 units          49,600    

Cost of ending inventory = $49,600                                  

Explanation:

In FIFO method, socks are issued out on first come, first served basis. The 350 units that were first issued will be valued at $34 per unit, the next 1,100 units will also be valued at $34. These two issues were taken from the opening inventory and are expected to be valued at the cost of opening inventory. the next 520 units sold will be valued at $55. This issue was made from 890 units purchased after the opening inventory.