Question

FIFO and LIFO Costs Under Perpetual Inventory System The following units of an item were available for sale during the year: Beginning inventory 39 units at $48 Sale 35 units at $72 First purchase 21 units at $49 Sale 19 units at $72 Second purchase 23 units at $50 Sale 14 units at $72 The firm uses the perpetual inventory system, and there are 15 units of the item on hand at the end of the year.

a. What is the total cost of the ending inventory according to FIFO? $
b. What is the total cost of the ending inventory according to LIFO? $

1. $2,529; $2,623.
2. $2,623; $2,529.
3. $2,460; $2,710.
4. $2,710; $2,460.

Answer 1

The total cost of the ending inventory according to FIFO is $3,651, while the total cost of the ending inventory according to LIFO is $2,164.

Step-by-step explanation:

To determine the total cost of the ending inventory according to FIFO, we need to follow the first-in, first-out method. This means that we assume the items that were purchased first are the ones that are sold first. Looking at the given information, we can calculate the cost of the ending inventory using FIFO as follows:

1. Beginning inventory: 39 units at $48 = $1,872
2. First purchase: 21 units at $49 = $1,029
3. Second purchase: 15 units at $50 (remaining after selling 19 units) = $750
4. Total cost of the ending inventory according to FIFO: $1,872 + $1,029 + $750 = $3,651

Therefore, the total cost of the ending inventory according to FIFO is $3,651.

To determine the total cost of the ending inventory according to LIFO, we need to follow the last-in, first-out method. This means that we assume the items that were purchased last are the ones that are sold first. Using the given information, we can calculate the cost of the ending inventory using LIFO as follows:

1. Second purchase: 23 units at $50 = $1,150
2. First purchase: 6 units at $49 (remaining after selling 35 units and 14 units) = $294
3. Beginning inventory: 15 units at $48 (remaining after selling 35 units, 19 units, and 14 units) = $720
4. Total cost of the ending inventory according to LIFO: $1,150 + $294 + $720 = $2,164

Therefore, the total cost of the ending inventory according to LIFO is $2,164.