Question

Given the following:

	Number purchased	Cost per unit			Total
January 1 inventory	31	$	4		$	124
April 1	51		7			357
June 1	41		8			328
November 1	46		9			414
	169				$	1,223

a. Calculate the cost of ending inventory using the FIFO (ending inventory shows 52 units).

b. Calculate the cost of goods sold using the FIFO (ending inventory shows 52 units).

Answer 1

a) Cost of ending inventory using the FIFO = $462

b) Cost of goods sold using the FIFO = $761

Workings

No of units sold = Beginning inventory + Purchases – Ending Inventory

                             =31+51+41+46-52

                              =117 units

Under FIFO method, goods which are purchased first are assumed to be sold first. So, the ending inventory consists of units which are purchased last.

                       Cost of goods available for sale         Cost of Goods Sold                    Ending Inventory

FIFO	No of units	Cost per unit	Cost of goods available for sale	No of units	Cost per unit	Cost of Goods Sold	No of units in ending inventory	Cost per unit	Ending inventory
Beginning Inventory	31	$4	$124	31	$4	$124
Purchases:
April 1	51	$7	$357	51	$7	$357
June 1	41	$8	$328	35	$8	$280	6	$8	$48
November 1	46	$9	$414				46	$9	$414
Total	169		$1,223	117		$761	52		$462