Question

King costume uses a periodic inventory system the company started the month with 8 masks in it begining inventory that cost $10 each. king costume purchased 40 additional masks for $12 each and 5 mask remained unsold. Using the LIFO method, its cost of goods sold for the month is:

a. $434.

b. $440.

c. $24.

d. $428.

Answer 1

The correct answer is $510 (not in the options)

Step-by-step explanation:

Using the Last-in First-out (LIFO) method of inventory, the cost of the most recent goods purchased (or produced) are the first to be recorded as the cost of goods sold.

Therefore:

beginning stock = 8 masks at $10 each

additional purchase = 40 masks at $12 each

total inventory within the period = 40 + 8 = 48 masks

ending inventory = 5 masks.

Total good sold = Total inventory - ending inventory

= 48 - 5 = 43 masks

To calculate the cost of goods sold, under the LIFO method, you have to note that the out of the 43 masks sold, 40 of the most recent purchases will be sold first, after which, 3 addition goods from the beginning inventory will be sold. Hence cost of goods sold is calculated as:

from most recent purchase (at $12 each) = 40 × 12 = $480

from beginning inventory (at $10 each) = 3 × 10 = $30

∴ Total cost of goods sold = 480 + 30 = $510

unfortunately, $510 is not in any of the options.

Answer 2

Option A is correct.

Cost of goods sold for the month is 434$

Step-by-step explanation:

Opining stock = 6 Masks*$8 Each = $48

Purchases = 41 Masks*$10 Each = $410

Closing stock = 3 Masks

Total number of masks sold = Opening stock+ Purchases - Closing stock

= 6+41 - 3 = 44 masks

As per LIFO method total sold units 44 Masks belongs to 41 of Purchased units and 3 units from opening stock.

Cost of goods sold as per LIFO = 3 Masks $8 Each+ 41 Masks*$10 Each

= $434