Question

Domino Co. has the following data related to an item of inventory: Beginning Inventory, March 1 - 100 units @ $2.10 Purchase, March 7 - 350 @ $2.20 Purchase, March 16 - 70 @ $2.25 Ending Inventory, March 31 - 130 The value assigned to cost of goods sold if Domino uses FIFO is The value assigned to ending inventory if Domino uses LIFO is

Can anyone please explain the steps and thinking order to get the answers? I know the answers but still don't understand.

Answer 1

Computation of Value of Closing Inventory:

S.No	Particulars	Units	Rate Per Unit ( $ )
A	Opening Inventory	100	2.1
B	Purchases
	i) March 07	350	2.2
	ii) March 16	70	2.25
C	Closing Inventory	130
D	Cost of Goods Sold ( A+B-C)	390
F	Value Assigned to Cost f Goods Sold Under FIFO (Note-1)		2.17
G	Value to be assigned for Closing Inventory		2.17
H	Value of Closing Inventory ( C*G ) ( Total value )		282.1

Note-1: Value Assigned to Cost f Goods Sold Under FIFO :

Units	Rate to be applied ( $ )	Value ( $ )
100	2.1	210
290	2.2	638
Cost of Goods Sold ( Value)		848
Cost of Goods Sold (Units)		390
Value Per Unit		2.17

Value assigned for Cost of Goods Sold shall be the Value to be assigned for Closing Inventory valuation,

Therefore first of all we have to calculate the value per unit for cost of goods sold under FIFO method. We can get this value by dividing  total value of cost of goods sold with number of units of goods sold.

Value ( Rate per Unit ) thus obtained shall be the rate to be applied on Closing Inventory of 130 Units.