Question

Sheridan Company just began business and made the following four inventory purchases in June: June 1 126 units $870 June 10 168 units 1310 June 15 168 units 1410 June 28 126 units 1110 $4700 A physical count of merchandise inventory on June 30 reveals that there are 180 units on hand. Using the FIFO inventory method, the amount allocated to ending inventory for June is

Answer 1

In FIFO method, those inventories are sold out first, which the company purchases first. It means the ending inventory will be from the recent purchases.

Here, total 180 units are unsold which are in the ending inventory. These will be from the latest purchases. 126 units of purchase made on June 28 and 54 units ( i.e. 180 - 126 ) from the purchase made on June 15 will be in the ending inventory

Cost per unit of units purchased on June 15 = $1,410 / 168 units = $8.39

Ending inventory cost = $1,110 + ( 54 units * $8.39 ) = $1,563