Question

The following information is available from Gamma Corp. regarding the inventory of its best-selling mesh router:

Date	Transaction	Number of Units	Cost per Unit
1/1	Beginning Inventory	290	$	990
4/5	Purchase	390	$	1,090
7/12	Purchase	490	$	1,190
11/3	Purchase	295	$	1,240

Gamma sold 1,225 mesh routers during the year.

What was ending inventory under the FIFO cost flow assumption?

Multiple Choice

• $237,600.

• $297,600.

• $257,600.

• $297,100.

Answer 1

Date	Transaction	Number	Cost per Unit	Total cost
		of Units
1/1	Beginning Inventory	290	990	287,100
4/5	Purchase	390	1,090	425,100
7/12	Purchase	490	1,190	583,100
11/3	Purchase	295	1,240	365,800
Total cost		1,465		1,661,100

Number of units available for sale = 1,465

Number of units sold = 1,225

Ending inventory units = Number of units available for sale- Number of units sold

= 1,465-1,225

= 240 units

As per periodic FIFO method, ending inventory will consists of units purchased at the latest. Thus, ending inventory of 240 units will be from 11/3.

Cost of ending inventory = Ending inventory units x cost per unit

= 240 x 1,240

= $297,600

Second option is correct.