compute cost of goods sold for january and the ending inventory using both the fifo and lifo methods.
compute cost of goods sold for january and the ending inventory using both the fifo and lifo methods.
Answer
Explanation:
Step1: Understand FIFO method
FIFO (First - In, First - Out) assumes that the first units purchased are the first ones sold.
Step2: Calculate cost of goods sold - FIFO
The beginning inventory of 600 units at $70 per unit is sold first, cost = 600×$70 = $42,000. Then 1300 units from the January 15 purchase at $85 per unit are sold, cost = 1300×$85=$110,500. Total cost of goods sold = $42,000 + $110,500=$152,500.
Step3: Calculate ending inventory - FIFO
The remaining 1100 units are from the January 21 purchase at $90 per unit, so ending inventory cost = 1100×$90 = $99,000.
Step4: Understand LIFO method
LIFO (Last - In, First - Out) assumes that the last units purchased are the first ones sold.
Step5: Calculate cost of goods sold - LIFO
The 1100 units from the January 21 purchase at $90 per unit are sold first, cost = 1100×$90 = $99,000. Then 1300 units from the January 15 purchase at $85 per unit are sold, cost = 1300×$85=$110,500. Total cost of goods sold = $99,000 + $110,500=$199,500 (but the problem has 1100 units sold in LIFO calculation, so cost of goods sold = 1100×$90=$99,000).
Step6: Calculate ending inventory - LIFO
The remaining 600 units are from the beginning inventory at $70 per unit, so ending inventory cost = 600×$70 = $42,000.
Answer:
Cost of goods sold - FIFO: $152,500 Ending inventory - FIFO: $99,000 Cost of goods sold - LIFO: $99,000 Ending inventory - LIFO: $42,000