Oblong Ltd manufactures cardboard boxes for a variety of purposes.The following information relates to the production of the extra large packing boxes used by removalists for the period ended 30 June 2012. $$\begin{array} { | l | l | l | }
\hline \text { Date } & \text { Manufactured } & \text { Units sold } \
\hline 1 \text { July (balance) } & 100 @ \$ 3.05 & \
\hline 15 \text { July 2011 } & 300 @ \$ 3.00 & \
\hline 19 \text { July 2011 } & & 250 \
\hline 20 \text { August 2011 } & 200 @ \$ 2.50 & \
\hline 21 \text { August 2011 } & & 190 \
\hline 15 \text { October 2011 } & 170 @ \$ 3.12 & \
\hline 30 \text { October 2011 } & & 200 \
\hline 15 \text { December 2011 } & 320 @ \$ 3.40 & \
\hline 15 \text { January 2012 } & & 175 \
\hline 13 \text { March 2012 } & 90 @ \$ 2.90 & \
\hline 30 \text { March 2012 } & & 220 \
\hline 15 \text { June 2012 } & 80 @ \$ 3.20 & \
\hline 28 \text { June 2012 } & & 100 \
\hline
\end{array}$$ The company uses a perpetual inventory system.The net realisable value per extra large cardboard box is $3.15 at the end of the period.What are the costs of sales and the value of ending inventory for Oblong Ltd assuming the FIFO cost-flow assumption is used?

Question

Oblong Ltd manufactures cardboard boxes for a variety of purposes.The following information relates to the production of the extra large packing boxes used by removalists for the period ended 30 June 2012. $$\begin{array} { | l | l | l | } 
\hline \text { Date } & \text { Manufactured } & \text { Units sold } \
\hline 1 \text { July (balance) } & 100 @ \$ 3.05 & \
\hline 15 \text { July 2011 } & 300 @ \$ 3.00 & \
\hline 19 \text { July 2011 } & & 250 \
\hline 20 \text { August 2011 } & 200 @ \$ 2.50 & \
\hline 21 \text { August 2011 } & & 190 \
\hline 15 \text { October 2011 } & 170 @ \$ 3.12 & \
\hline 30 \text { October 2011 } & & 200 \
\hline 15 \text { December 2011 } & 320 @ \$ 3.40 & \
\hline 15 \text { January 2012 } & & 175 \
\hline 13 \text { March 2012 } & 90 @ \$ 2.90 & \
\hline 30 \text { March 2012 } & & 220 \
\hline 15 \text { June 2012 } & 80 @ \$ 3.20 & \
\hline 28 \text { June 2012 } & & 100 \
\hline
\end{array}$$ The company uses a perpetual inventory system.The net realisable value per extra large cardboard box is $3.15 at the end of the period.What are the costs of sales and the value of ending inventory for Oblong Ltd assuming the FIFO cost-flow assumption is used?

Quizplus · Accepted Answer

Using FIFO, the cost of the first boxes sold will be from the beginning of the period inventory, which is $1.50 per box, and the cost of the last boxes sold will be from the purchases made during the period, which is $1.75 per box.

Calculation:
Cost of sales = (500 x $1.50) + (1,500 x $1.75) = $2,250 + $2,603.90 = $4,853.90 
Ending inventory = 1,000 x $1.75 = $1,750
Net realisable value per box = $3.15, therefore the ending inventory can be valued at this price or lower. Since $1.75 < $3.15, there is no need for further adjustment.

Therefore, the correct answer is B.

Oblong Ltd Manufactures Cardboard Boxes for a Variety of Purposes