A company had the following purchases and sales during its first year of operations: On December 31,there were 26 units remaining in ending inventory.
-Using the periodic LIFO inventory costing method,what is the cost of the ending inventory? (Assume all sales were made on the last day of the month.)
A)$3,405.
B)$3,270.
C)$3,200.
D)$3,364.
E)$5,400.

Question

A company had the following purchases and sales during its first year of operations:  On December 31,there were 26 units remaining in ending inventory.
-Using the periodic LIFO inventory costing method,what is the cost of the ending inventory? (Assume all sales were made on the last day of the month.)
A)$3,405. 
B)$3,270. 
C)$3,200. 
D)$3,364. 
E)$5,400.

Quizplus · Accepted Answer

To determine the cost of ending inventory using periodic LIFO, we need to start by identifying the latest purchases made before the sales on the last day of the month.

In this case, the purchases made in December (at a cost of $34 per unit) are the most recent, so we will begin with those.

First, we will account for all of the units that were sold during the year. 
- We sell 17 units at a cost of $30, leaving 13 units in inventory. 
- We sell 30 units at a cost of $32, leaving minus 17 units. This means we need to use units from previous purchases to fill this sale, specifically 17 units from November at a cost of $33. 
- We sell 19 units from November at a cost of $33, leaving minus 36 units. Again, we need to use units from previous purchases to fill this sale, specifically 17 units from September at a cost of $28. 
- We sell 17 units from September at a cost of $28, leaving minus 53 units. We use all of the remaining units in inventory which were purchased in July at a cost of $26.

Adding up the costs of all these units: 
(13 units * $34) + (17 units * $33) + (17 units * $28) + (3 units * $26) = $3,200.

Therefore, the cost of the ending inventory is $3,200. The answer is C.

A Company Had the Following Purchases and Sales During Its