Question

Use the following data to calculate the cost of ending inventory using the LIFO method:

September 1 Beginning Inventory 15 units at $20 each
September 10 Purchase 20 units at $25 each
September 20 Purchase 25 units at $28 each
September 30 Ending Inventory 30 units

a. $825b. $750c. $675d. $600

Answer 1

The correct answer is option (c).

Step-by-step explanation:

According to the scenario, computation of the given data are as follows:

First we calculate the units sold, then

Units Sold = Opening Inventory + Purchase - Ending Inventory

= 15 units + 20 units + 25 Units - 30 units

= 30 Units

According to the LIFO method:

25 units taken for Sep. 20

5 units taken from Sep.10

So, we can calculate the ending inventory by using following formula:

Cost of Ending Inventory

Remaining 15 units of opening inventory = 15 × $20 = $300

Remaining 15 units from Sep.10 = 15 × $25 = $375

Total Ending Inventory = $300 + $375

=$675