Question

The beginning inventory on November 1 includes 15 units at a cost of $8.00 per unit. Following information is related to purchases made during November: Units Unit Cost Nov. 8 Purchase 60 units $8.60 17 Purchase 30 units $8.40 25 Purchase 45 units $8.80 A physical count of merchandise inventory on November 30 reveals that there are 50 units on hand. Assume a periodic inventory system is used. Cost of ending inventory under FIFO is

Answer 1

In Periodic Inventory System the transactions that take place are not updated immediately but the same are recorded at the end of a particular period. Here periodic FIFO method is used, in which those goods are sold out first, which are purchased first by the company. It indicates that ending goods will be from the recent purchase.

Here, 50 units are in the ending inventory.

Here on November 25, 45 units were purchased and on November17, 30 units were purchased. On November 30, 50 units were in hands of which 45 units were of 25 November and 5 units were of 17 November.

So ,as per FIFO method these 50 (45+5 ) units will be ending inventory.

Cost of Ending Inventory = 45 Units * $ 8.80 + 5 Units * $ 8.4

Cost of Ending Inventory = $ 438