Question

Mountain Company uses the periodic inventory system. For the current month, the beginning inventory consisted of 1,200 units that cost $60 each. During the month, the company made two purchases: 500 units at $58 each and 2,000 units at $56 each. Mountain Company also sold 2,150 units during the month. Using the periodic FIFO method, what is the cost of ending inventory?

Answer 1

$86,800

Step-by-step explanation:

Given:

Beginning inventory = 1,200 units

Unit cost of beginning inventory = $60

Purchases:

500 units at $58 each

2,000 units at $56 each

Total units sold = 2,150 units

Now,

Total units before selling = Beginning inventory + Purchases

= 1,200 + 500 + 2,000

= 3,700

Units left in the inventory = 3,700 - 2,150 = 1,550

Under the FIFO method the units sold are the units which are purchased first

Therefore,

The cost of ending inventory = Units left in the inventory × Unit price of the last purchase

= 1,550 × $56

= $86,800