Question

FIFO and LIFO Costs Under Perpetual Inventory System

The following units of an item were available for sale during the year:

Beginning inventory	43 units at $50
Sale	15 units at $78
First purchase	39 units at $51
Sale	15 units at $79
Second purchase	24 units at $54
Sale	25 units at $80

The firm uses the perpetual inventory system, and there are 51 units of the item on hand at the end of the year.

a. What is the total cost of the ending inventory according to FIFO?

b. What is the total cost of the ending inventory according to LIFO?

Answer 1

	Total cost of Ending Inventory:
a.	FIFO	=	$    2,673
b.	LIFO	=	$    2,573
	Workings:
a.		Purchases			Cost of goods sold -FIFO			Inventory on hand
	FIFO	Quantity	Cost per unit	Total cost	Quantity	Cost per unit	Total cost	Quantity	Cost per unit	Total cost
	Beginning Balance							43	$          50	$    2,150
	Sale				15	$          50	$        750	28	$          50	$    1,400
	Purchase	39	$          51	$    1,989				28	$          50	$    1,400
								39	$          51	$    1,989
	Sale				15	$          50	$        750	13	$          50	$        650
								39	$          51	$    1,989
	Purchase	24	$          54	$    1,296				13	$          50	$        650
								39	$          51	$    1,989
								24	$          54	$    1,296
	Sale				13	$          50	$        650	27	$          51	$    1,377
					12	$          51	$        612	24	$          54	$    1,296
	Totals	63		$    3,285	55		$    2,762	51		$    2,673
b.		Purchases			Cost of goods sold - LIFO			Inventory on hand
	LIFO	Quantity	Cost per unit	Total cost	Quantity	Cost per unit	Total cost	Quantity	Cost per unit	Total cost
	Beginning Balance							43	$          50	$    2,150
	Sale				15	$          50	$        750	28	$          50	$    1,400
	Purchase	39	$          51	$    1,989				28	$          50	$    1,400
								39	$          51	$    1,989
	Sale				15	$          51	$        765	28	$          50	$    1,400
								24	$          51	$    1,224
	Purchase	24	$          54	$    1,296				28	$          50	$    1,400
								24	$          51	$    1,224
								24	$          54	$    1,296
	Sale				24	$          54	$    1,296	28	$          50	$    1,400
					1	$          51	$          51	23	$          51	$    1,173
	Totals	63		$    3,285	55		$    2,862	51		$    2,573