Question

FIFO and LIFO Costs Under Perpetual Inventory System

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

Beginning inventory	24 units at $46
Sale	12 units at $74
First purchase	26 units at $48
Sale	25 units at $74
Second purchase	14 units at $51
Sale	13 units at $74

The firm uses the perpetual inventory system, and there are 14 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

a)FIFO :Units acquired first are sold first

	Inventory Purchase	cost of goods sold	Inventory at end
	# of unit	unit cost	Total	# of unit	unit cost	Total	# of unit	unit cost	Total
Beginning							24	46	1104
sales				12	46	552	24-12=12	46	552
First purchase	26	48	1248				12	46	552
							26	48	1248
sales				12	46	552
				13	48	624	26-13= 13	48	624
second purchase	14	51	714				13	48	624
							14	51	714
sale				13	48	624	14	51	714

the total cost of the ending inventory according to FIFO = 714

b)LIFO :Units acquired Last are sold first.

	Inventory Purchase	cost of goods sold	Inventory at end
	# of unit	unit cost	Total	# of unit	unit cost	Total	# of unit	unit cost	Total
Beginning							24	46	1104
sales				12	46	552	24-12=12	46	552
First purchase	26	48	1248				12	46	552
							26	48	1248
sales				25	48	1200	12	46	552
							26-25=1	48	48
second purchase	14	51	714				12	46	552
							1	48	48
							14	51	714
sale				13	51	663	12	46	552
							1	48	48
							1	51	51

the total cost of the ending inventory according to LIFO = 552+48+51 = 651