Question

Calculate the cost of ending inventory using FIFO method. 1/1 Beginning inventory 10 units at $10 each 2/28 Purchase 40 units at $12 each 5/10 Purchase 50 units at $14 each 9/20 Purchase 30 units at $16 each 12/31 Ending inventory 50 units

Answer 1

The cost of ending inventory under FIFO is $760

Step-by-step explanation:

Under FIFO or the First In First Out method, we assume that the inventory that is purchased first will be the one that is sold first and the ending inventory will consist of the most recent purchases.

The total units of inventory available for sale = 10 + 40 + 50 + 30 = 130 units

The ending inventory is of 50 units.

Thus, sales are = 130 - 50 = 80 units

The ending inventory will consist of the 30 units that were purchased on 9/20 at $16 per unit along 20 units from the purchases of 50 units from 5/10 at $14 each because we assume that the ending inventory consists of the most recent purchases.

Ending inventory = 30 * 16 + 20 * 14 = $760