Respuesta :
Answer:
The answer is $762
Explanation:
Without doubt the 140 units on hand at month end would comprises of:
100 bought units on 1/28/13 for $5.50 each $550
40 units purchased on 1/15/13 $5.30 each $212
Total value of closing inventory $762
The value of closing inventory at the end of the month using FIFO method of valuing inventory is $762
FIFO First In First Out method assumes that the first sets of stock purchased are sold first which is in sharp contrast with LIFO Last In First Out where the last sets of inventory are assumed to be sold first.
However, the LIFO method tends to overvalue inventory in a period of rising inflation
Answer:
Ending inventory value is $762 (100 units at $5.50 each, i.e. $550 + 40 units at $5.30 each, i.e. $212).
Explanation:
The FIFO inventory system assumes that the units bought first will be utilized first. It is called First-in, First-out.
The implication is that for the 140 units ending inventory for January 2013, the value will be split between the purchases on January 28 and January 15. Therefore, the first 100 units from the 140 are costed at the purchase price of $5.50 per unit while the remaining 40 units are costed at the purchase price of $5.30 per unit.
There are other methods of valuing inventory, including LIFO (Last in, First Out), Weighted Average Method, e.t.c. which are not discussed here.
