In: Finance
At the end of January, Mineral Labs had an inventory of 845 units, which cost $13 per unit to produce. During February the company produced 1,250 units at a cost of $17 per unit.
a. If the firm sold 1,550 units in February, what was the cost of goods sold? (Assume LIFO inventory accounting.)
Cost of goods sold =
b. If the firm sold 1,550 units in February, what was the cost of goods sold? (Assume FIFO inventory accounting.)
Cost of goods sold =
January Inventory = 845
January Inventory unit price =$13
February inventory = 1250
February inventory unit price = $17
No of units sold = 1550
a) Cost of goods sold under LIFO accounting method
LIFO takes the latest inventory batch to be sold first before the preceding batch
Cost of goods sold = February inventory * February inventory unit price + (No of units sold - February inventory) * January Inventory unit price
Cost of goods sold = 1250 * $17 + (1550 - 1250) * $13
Cost of goods sold under LIFO = $25,150
b) Cost of goods sold under FIDO accounting method
FIFO takes the earliest inventory batch to be sold first before the succeeding batch
Cost of goods sold = January inventory * January inventory unit price + (No of units sold - January inventory) * February Inventory unit price
Cost of goods sold = 845 * $13 + (1550 - 845) * $17
Cost of goods sold under FIFO = $22,970