A firm that sells a single product had a beginning inventory of 4,000 units with a total cost of $16,000.Early in the year,8,000 units were purchased at $6 each.Using LIFO,what is the value of the ending inventory of 2,000 units?

Question

Quizplus · Accepted Answer

Using LIFO, the cost of the most recent purchases will be matched with the cost of goods sold first. Therefore, the cost of the 2,000 units in the ending inventory will be based on the cost of the earliest purchase (beginning inventory) and the next purchase after that.

The cost of the 8,000 units purchased later will be used up in the cost of goods sold calculation first.

Cost of goods sold = 8,000 units x $6 = $48,000

The beginning inventory of 4,000 units at a cost of $16,000 will be used up next.

Cost of goods sold = 4,000 units x $4 = $16,000

The remaining 2,000 units in the ending inventory will be based on the next purchase of 4,000 units at a cost of $6 each.

Ending inventory = 2,000 units x $6 = $12,000

Therefore, the value of the ending inventory of 2,000 units is $12,000 (option C).

A Firm That Sells a Single Product Had a Beginning