Question

Inventory records for Dunbar Incorporated revealed the following:

Date Transaction Number of Units Unit Cost
Apr. 1 Beginning inventory 440 $ 2.49
Apr. 20 Purchase 420 2.72

Dunbar sold 590 units of inventory during the month. Ending inventory assuming FIFO would be (Do not round your intermediate calculations. Round your answer to the nearest dollar amount):

a) $672. b) $1,197. c) $734. d) $1,096.

Answer 1

c) $734

Step-by-step explanation:

FIFO stands for "first in first out", which means that the units purchased first, are going to be sold first. In this case, since 590 units of inventory were sold during April, all of the 440 units on inventory at April 1st will be sold, and the remaining sales will come from the additional units purchased in April 20th.

The ending inventory for April is:

`I = 440+420-590\\I=270\ units`

Using FIFO, those units should be valued at $2.72 each. The value of ending inventory should be:

`E = 270*\$2.72\\E=\$734`