Question

Tomasino's inventory records show the following data at January​ 31:

Beginning inventory Jan. 1	90 units at $ 8 per unit
Jan. 10 purchase	330 units at $12 per unit
Jan. 22 purchase	100 units at $13 per unit

At January​ 31,180 units are still on hand. What is the cost of the ending inventory at January 31 if Tomasino uses the FIFO​ method?

Answer 1

Solution:

As per the First In First Out (FIFO) Method of Inventory Accounting, the units produced earliest are assumed to be sold first.

This implies that, units that are produced at the earliest date, are to be included in the cost of goods sold first.

Therefore the units that are produced at the latest date are to be included in the cost of ending inventory at January 31.

As per the information given in the question the ending inventory had 180 units.

Thus as per the FIFO Method, the cost of ending Inventory is

a. the 100 units from the latest purchase of Jan 22 and

b, the balance ( 180 – 100 ) = 80 units from the Jan 10 purchase.

The cost of ending inventory at January 31

= ( 100 * $ 13 ) + ( 80 * $ 12 )

= $ 1,300 + $ 960

= $ 2,260

Thus the cost of ending inventory as on Jan 31 = $ 2,260