Question

Ow 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 cost of goods sold under lifo?

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

Answer 1

Using the LIFO method, the cost of goods sold after selling 1,000 units is calculated as $1,800 for the 400 units from the September 8 purchase and $2,550 for the 600 units from the April 20 purchase, totaling $4,350.

Step-by-step explanation:

To calculate the cost of goods sold under the LIFO (Last-In, First-Out) method, we will start from the most recent inventory purchases and work backwards until we have accounted for the 1,000 units sold. Here's the breakdown:

• September 8 purchase: 400 units × $4.50 = $1,800
• April 20 purchase: 600 units (out of 800 purchased) × $4.25 = $2,550

We use all 400 units from the September 8 purchase and 600 units from the April 20 purchase. We do not need to use any units from the beginning inventory since only 1,000 units are sold.

Cost of goods sold = September 8 cost + April 20 cost = $1,800 + $2,550 = $4,350