Question

Swifty uses the periodic inventory system. For the current month, the beginning inventory consisted of 7000 units that cost $9.00 each. During the month, the company made two purchases: 2800 units at $10.00 each and 11900 units at $10.50 each. Swifty also sold 12700 units during the month. Using the FIFO method, what is the ending inventory?

$94500.

$81000.

$83000.

$89553.

Answer 1

Given,

Beginning inventory = 7000 units @$9.00 each

Purchase 1 = 2800 units @$10 each

Purchase 2 = 11900 units @10.50 each

Sale = 12700 units

Solution :-

Ending units = beginning inventory + purchase 1 + purchase 2 - sale

= 7000 + 2800 + 11900 - 12700 = 9000 units

Using FIFO method, these 9000 units belongs to purchase 2 units, so, cost of each unit should be taken from purchase 2.

Now,

Ending inventory = ending units x cost of each units of purchase 2

= 9000 units x $10.50 = $94500