Question

Hudson Company started its year with 600 units of beginning inventory at a cost of $4 per unit. During the year, the company made the following purchases: May, 900 units at $5 per unit and July, 500 units at $6 per unit. A physical count of inventory at year-end indicates that there are 700 units in ending inventory. What is the cost of the ending inventory if Hudson Company uses the FIFO method for valuing inventory?

Answer 1

$5,000

Step-by-step explanation:

units price total

beginning inventory 600 $4 $2,400

purchase May 900 $5 $4,500

purchase July 500 $6 $3,000

total 2,000 $9,900

ending inventory 900

The first in, first out (FIFO) method considers that the oldest inventory is sold first.

Ending inventory = (500 x $6) + (400 x $5) = $3,000 + $2,000 = $5,000