Question

Brownie Company had no beginning inventory. The company purchases 900 units of inventory in January at $5 each, 1,500 units at $4 each in August, and 600 units at $6 each in November. The company sells 450 units during the year. Brownie uses a periodic inventory system and the LIFO inventory costing method. What is the cost of goods sold?

a. $1,800
b. $2,802
c. $2,250
d. $2,700

Answer 1

Using the LIFO inventory costing method, Brownie Company's cost of goods sold for the 450 units is 450 × $6, totaling $2,700.

Step-by-step explanation:

The cost of goods sold (COGS) using the LIFO (Last-In, First-Out) inventory costing method is calculated by taking the cost of the most recently purchased items first. In this case, Brownie Company sold 450 units. According to LIFO, the 600 units purchased in November at $6 each would be the first considered sold. Since only 450 units were sold, all of them are taken from the November purchase.

The calculation for the cost of goods sold is 450 units × $6 per unit, which equals $2,700. Therefore, the correct answer is d. $2,700.

The cost of goods sold can be calculated using the LIFO inventory costing method. In a periodic inventory system, the cost of goods sold is calculated based on the most recent purchases. In this case, the company sells 450 units during the year. The most recent purchases were 600 units in November at $6 each. So, the cost of goods sold would be 450 units multiplied by $6, which equals $2,700.