Question

Dobler Company uses a periodic inventory system. Details for the inventory account for the month of January 2022 are as follows: Units Per unit price Total Balance, 1/1/2022 300 $5.00 $1500 Purchase, 1/15/2022 150 ..5.30 795 Purchase, 1/28/2022 150 ..5.50 825 An end of the month (1/31/2022) inventory showed that 240 units were on hand. If the company uses FIFO, what is the value of the ending inventory

Answer 1

$1,302

Step-by-step explanation:

FIFO is an inventory valuation method in which the date of purchase of an item of inventory is key to the selection of that item for sale. FIFO means First in First out and is a system mostly adopted for items with expiry date.

It is a system that allows inventory items bought first to be sold before inventory items purchased subsequently.

Given;

Units Per unit price Total Balance

1/1/2022 300 $5.00 $1500

Purchase, 1/15/2022 150 $5.30 $795

Purchase, 1/28/2022 150 $5.50 $825

Total 600

This means that units sold = 600 - 240

= 360

This 360 units sold must have included 300 units from 1/1/2020 and 60 units from the purchase on 1/15/2022.

Thus the balance of 240 units includes 90 units from purchases made on 1/15/2022 and the Purchase made on 1/28/2022. The value of the ending inventory

= ($5.30 * 90) + ($5.50 * 150)

= $1,302

Answer 2

Total value of closing inventory = $1,302

Step-by-step explanation:

Units sold = opening inventory + purchases - closing inventory

= 300 + (150 + 150) -240 = 360 units

Cost of units sold

The units of 360 sold are assumed to have sold in the following order

First 300 at $5 opening inventory

Next 60 at $ 5.30 from the batch of 150 units

360

Value of inventory

Therefore the closing inventory of 240 units are valued as follows

90 × $5.3 = 477 from the balance of 90from the first batch i.e (150-60)

150 × $5.50 = 825 from the last batch

Total value of closing inventory = 477 + 825 = $1,302