Question

In its first month of operations, Bramble Corp. made three purchases of merchandise in the following sequence: (1)  240 units at $ 4, (2)  340 units at $ 6, and (3)  440 units at $ 7. Assuming there are  140 units on hand at the end of the period, compute the cost of the ending inventory under (a) the FIFO method and (b) the LIFO method. Bramble Corp. uses a periodic inventory system.

Answer 1

a)Cost of Inventory under FIFO method

Under FIFO method the inventory which comes first will be issued first for sale. Hence the value of inventory will be the value of inventory purchased lastly and remaining unsold.

In the present case the ending inventory is 140 units. This is the balance out of 440 units purchased at a cost of $7 per unit.

Hence, cost of ending inventory = 140units*$7= $980

b)Cost of Inventory under LIFO method

Under LIFO method the inventory which comes last will be issued first for sale. Hence the value of inventory will be the value of inventory purchased firstly and remaining unsold.

In the present case the ending inventory is 140 units. This is the balance out of 240 units purchased at a cost of $4 per unit.

Hence, cost of ending inventory = 140units*$4= $560