Question

Primary Co uses UFo. They currently have 500 units of inventory purchased on 1/1/21, for $20 per unit they ako have 300 units of inventory purchased on 3/321 for $22 per unit. On 4/1/21, they sell 460 units

A. Out of the 460 units sold, how many will be sold trom the tarer of inventory that cost 320 per unit?
B. Out of the 400 units sold. how many will be sold from the layer of inventary that cost $22 per unit?

Answer 1

Under LIFO, Primary Co will sell 160 units from the $20 per unit layer and 300 units from the $22 per unit layer out of the 460 units sold.

Step-by-step explanation:

The question pertains to the accounting and inventory cost method known as the Last-In, First-Out (LIFO) method. Under LIFO, the most recently purchased inventory is sold first. Primary Co has two layers of inventory, with 500 units at $20 per unit and 300 units at $22 per unit.

When Primary Co sells 460 units, it will sell all 300 units from the more recent layer of inventory costing $22 per unit first and then 160 units from the earlier layer costing $20 per unit.

A. Out of the 460 units sold, 160 units will be sold from the layer of inventory that cost $20 per unit.

B. Out of the 460 units sold, 300 units will be sold from the layer of inventory that cost $22 per unit.