Question

A company had the following purchases during the current year:

January: 10 units at $120
February: 20 units at $130
May: 15 units at $140
September: 12 units at $150
November: 10 units at $160
On December 31, there were 26 units remaining in ending inventory. These 26 units consisted of 2 from January, 4 from February, 6 from May, 4 from September, and 10 from November. Using the specific identification method, what is the cost of the ending inventory?
a. $3,280
b. $3,960
c. $3,800
d. $3,500
e. $3,640

Answer 1

Using the specific identification method, the cost of ending inventory for the company would be $3,800. This is calculated by summing the cost of each unit remaining in inventory, multiplied by the specific purchase prices from their respective months.

Step-by-step explanation:

To calculate the cost of the ending inventory using the specific identification method, we need to identify the specific costs of the items remaining in inventory. These consist of the following units and costs:

• 2 units from January at $120 each
• 4 units from February at $130 each
• 6 units from May at $140 each
• 4 units from September at $150 each
• 10 units from November at $160 each

The cost of the ending inventory is calculated as follows:

(2 x $120) + (4 x $130) + (6 x $140) + (4 x $150) + (10 x $160) = $240 + $520 + $840 + $600 + $1600 = $3,800.

Therefore, the cost of the ending inventory using the specific identification method is $3,800, which corresponds to option c.