Question

Mce incorporated uses the lifo method to calculate ending inventory. Assuming 200 units are not sold, the cost of goods sold is:

January 1 Inventory: 150 units at $15 = $2,250
March 3 Purchase: 300 units at $12 = $3,600
July 1 Purchase: 250 units at $14 = $3,500
November 10 Purchase: 400 units at $10 = $4,000

Answer 1

Using the LIFO method, the cost of goods sold for MCE Incorporated with 200 units unsold is calculated by considering the most recent purchases first, resulting in a total COGS of $7,300.

Step-by-step explanation:

To calculate the cost of goods sold (COGS) using the Last-In, First-Out (LIFO) method, we need to consider the most recent purchases first. As 200 units are unsold, they will be counted as part of the ending inventory. Therefore, we begin by removing the 200 units from the last purchase before calculating COGS.

From the November 10 purchase, we have 400 units at $10 each. Since 200 units are not sold, we subtract these from the 400 units, leaving us with 200 units at $10 each to include in the COGS calculation. The remaining units for COGS are taken from the previous purchases, working backward from the most recent purchases.

Calculating COGS:

• 200 units from November 10 purchase at $10 each = $2,000
• 250 units from July 1 purchase at $14 each = $3,500
• 300 units from March 3 purchase at $12 each (we need only 150 units to reach the total of 650 units sold) = $1,800 (150 units at $12 each)

The total COGS is the sum of these amounts:

$2,000 (from November 10 purchase) + $3,500 (from July 1 purchase) + $1,800 (from March 3 purchase) = $7,300.