Kip started a wholesale store this year selling bulk peanut butter. In January of this year Kip purchased an initial five tubs of peanut butter for a total cost of $5,000. In July Kip purchased three tubs for a total cost of $6,000. Finally, in November Kip bought two tubs for a total cost of $1,000. Kip sold six tubs by year end. What is Kip's ending inventory under the FIFO cost-flow method?

Question

Quizplus · Accepted Answer

FIFO (First-In, First-Out) cost-flow method assumes that the first items purchased are the first items sold. Therefore, the ending inventory would consist of the most recently purchased items. In this case, Kip purchased two tubs for a total cost of $1,000 in November. Therefore, the ending inventory under the FIFO cost-flow method would be $1,000.

Kip Started a Wholesale Store This Year Selling Bulk Peanut