Question

Snow company has the following inventory transactions for the year: date transaction number of units unit cost january 1 beginning inventory 200 $4.00 april 20 purchase 800 4.25 september 8 purchase 400 4.50 assuming snow sells 1,000 units, calculate ending inventory under fifo?

1) $1,650
2) $1,800
3) $4,200
4) $4,350

Answer 1

Under FIFO, the ending inventory for Snow Company after selling 1,000 units is 400 units remaining at $4.50 per unit, which calculates to $1,800.

Step-by-step explanation:

To calculate the ending inventory under the First-In, First-Out (FIFO) method, we consider the cost of the latest units remaining. Since Snow Company sells 1,000 units, it means the first 200 units from January at $4.00 are sold, plus 800 units from the April purchase at $4.25 are sold. The remaining inventory would therefore be all 400 units from the September purchase at $4.50 each. Hence, the ending inventory is calculated as:

400 units × $4.50/unit = $1,800.