Question

Assume your organization has the following inventory changes during the year.

Beginning inventory - 15 units valued at $10,000 each

February purchases - 13 units at $11,500 each

June purchases - 20 units at $12,000 each

Total units used - 42

calculate the value of then ending inventory and the value of the inventory used for the year, using both the FIFO and the LIFO method of cost flow

Answer 1

Under FIFO Method
The inventory which are first recorded are sold off first
think of it as ascending order
so
beginning inventory	15	10000
pruchases
feb	13	11500
june	20	12000
total	48	33500
used	42 units
beginning	15	10000
feb	13	11500
june	14	8400	(12000/20*14)
total	42	29900
so we have
ending inventory	6	3600	(33500-29900)
cost of usage	42	29900
Under LIFO Method
The inventory which are Last recorded are sold off first
think of it as descending order
so
beginning inventory	15	10000
pruchases
feb	13	11500
june	20	12000
total	48	33500
used	42 units
june	20	12000
feb	13	11500
beg.inventroy	9	6000	(10000/15*9)
total	42	29500
so we have
ending inventory	6	4000	(33500-29900)
cost of usage	42	29500