The Nachman Company began operation on January 1 of this year. It bought 600 units of inventory at $3 each on January 3, then it bought 400 units at $4 each in December. During the year it sold 900 items. Assuming it uses the FIFO method of accounting, its ending inventory of 100 units would be measured at
A) 300
B) 340
C) 350
D) 400

Question

Quizplus · Accepted Answer

Under FIFO (First-In, First-Out), the oldest inventory costs are used up first. Nachman sold 900 units, which means the 600 units bought at $3 each and 300 of the units bought at $4 each were sold. The remaining 100 units are from the December purchase at $4 each, so the ending inventory is 100 units x $4 = $400.

The Nachman Company Began Operation on January 1 of This