Question

In: Finance

At the end of January, Mineral Labs had an inventory of 845 units, which cost $13...

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 =

Solutions

Expert Solution

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


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