Question

A company had the following purchases and sales during its first year of operations: Purchases Sales January: 10 units at $120 6 units February: 20 units at $125 5 units May: 15 units at $130 9 units September: 12 units at $135 8 units November: 10 units at $140 13 units On December 31, there were 26 units remaining in ending inventory. Using the Perpetual FIFO inventory valuation method, what is the cost of the ending inventory

Answer 1

The cost of the ending inventory using the Perpetual FIFO inventory valuation method is $3,640.

Step-by-step explanation:

In order to determine the cost of the ending inventory using the Perpetual FIFO inventory valuation method, we need to calculate the cost of the units sold first. This method assumes that the first units purchased are the first ones sold.

For the purchases and sales given:

• January: 10 units at $120 each
• February: 20 units at $125 each
• May: 15 units at $130 each
• September: 12 units at $135 each
• November: 10 units at $140 each

Leading to the following cost of units sold:

• January: 6 units at $120 each = $720
• February: 5 units at $125 each = $625
• May: 9 units at $130 each = $1,170
• September: 8 units at $135 each = $1,080
• November: 13 units at $140 each = $1,820

The total cost of units sold is $5,415. Since there were 26 units remaining in ending inventory, the cost of the ending inventory is calculated as:

Cost of ending inventory = (Cost per unit x Number of units) = ($140 x 26) = $3,640

Answer 2

$3540.

Step-by-step explanation:

FIFO means first in, first out. It means that it is the first purchased inventory that is the first to be sold

Ending inventory comprises of goods bought in May, September and November

cost of the ending inventory :

(4 x $130) + (12 x $135) + (10 x$140) = $3540