A proposed new venture will cost $85,000 and should produce annual cash flows of $30,000, $55,000, $40,000, and $40,000 for Year
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Answer:
a. The value of ending Inventory using FIFO is $2749.
b. The value of ending Inventory using LIFO is $2667.
c. The value of ending Inventory using Average Cost method is $2713.
We have:
Date Explanation Units unit cost Total Cost
Sep-01 inv 11 97 1067
Sep-12 purchases 44 100 4400
Sep-19 purchases 47 101 4747
Sep-26 purchases 22 102 2244
Total 124 12458
Novak sold 97 snowboards, so the number of snowboards with it at the end of September is .
If Novak adopts First In First Out (FIFO) method, and 27 units are remaining, all 22 units purchased on Sept-26th and from the purchases made on Sept-19th will remain in inventory.
So the value of inventory using FIFO will be
If Novak adopts Last In First Out (LIFO) method, all 11 units in inventory on Sept-01st and from the purchases made on Sept-12th will remain in inventory.
Hence inventory value using LIFO will be
We calculate the Average cost by dividing the Total Cost by total number of units purchased.
The value of inventory using the average cost method is .