Question

Sales during the year were 500 units. Beginning inventory was 250 units at a cost of $5 per unit. Purchase 1 was 400 units at $6 per unit. Purchase 2 was 200 units at $7 per unit. Cost of goods sold under the LIFO cost flow assumption (using a periodic inventory system) was:

Answer 1

COGS under LIFO: $ 3,200

Step-by-step explanation:

Beginning inventory was 250 units at a cost of $5 per unit. Purchase 2 was 200 units at $7 per unit.

Beginning 250 units at $5 = $ 1,250

1st P 400 units at $6 = $ 2,400

2nd P 200 units at $7 = $ 1,400

Sales: 500 units

Under LIFO the first untis are ending inventory while the it sales the last units. Thus we must "grab" from the bottom row:

sales 500:

2nd P 200 units at $7 = $ 1,400

500 - 200 = 300 additional units to grab

1st P 300 units at $6 = $ 1,800

COGS under LIFO: $ 3,200