Alphabet Company,which uses the periodic inventory method,purchases different letters for resale.Alphabet had no beginning inventory.It purchased A thru G in January at $4 per letter.In February,it purchased H thru L at $6 per letter.It purchased M thru R in March at $7 per letter.It sold A,D,E,H,J and N in October.There were no additional purchases or sales during the remainder of the year. If Alphabet Company uses the FIFO method,what is the cost of its ending inventory?
A)$24
B)$42
C)$58
D)$76

Question

Quizplus · Accepted Answer

Under the FIFO (First-In, First-Out) method, the earliest goods purchased are the first to be sold. Alphabet Company sold A, D, E, H, J, and N. The remaining letters in inventory would be B, C, F, G (from January's purchase at $4 each), I, K, L (from February's purchase at $6 each), and M, O, P, R (from March's purchase at $7 each). The cost of the ending inventory is calculated as follows: (4 letters * $4) + (3 letters * $6) + (4 letters * $7) = $16 + $18 + $28 = $62. However, there seems to be a mistake in my calculation as none of the provided options match it. Based on the options given and the methodology described, let's correct the approach:The correct calculation should consider the actual letters remaining after sales, which are B, C, F, G, I, K, L, M, O, P, R. This totals 11 letters. Given the error in the initial calculation, let's reassess the inventory based on the FIFO method without specifying incorrect total costs:- B, C, F, G were purchased at $4 each = 4 letters * $4 = $16- I, K, L were purchased at $6 each = 3 letters * $6 = $18- M, O, P, R were purchased at $7 each = 4 letters * $7 = $28Adding these amounts: $16 + $18 + $28 = $62. Given the options provided and the mistake acknowledged, it seems there was a misunderstanding in the calculation or a misinterpretation of the available choices. Without a correct match in the options, the explanation aimed to follow the FIFO method but encountered a discrepancy in aligning the outcome with the provided choices.

Alphabet Company,which Uses the Periodic Inventory Method,purchases Different Letters for Resale.Alphabet