Use this inventory information for the month of August to answer the following question. Assuming that a perpetual inventory system is used.
-What is ending inventory on a FIFO basis?
A)$3,904
B)$3,984
C)$4,024
D)More information is needed.

Question

Use this inventory information for the month of August to answer the following question.  Assuming that a perpetual inventory system is used.
-What is ending inventory on a FIFO basis?
A)$3,904 
B)$3,984 
C)$4,024 
D)More information is needed.

Quizplus · Accepted Answer

Using the FIFO method, we assume that the inventory sold first is the first inventory purchased. 
So, the cost of the ending inventory would be calculated as follows:

4 units x $200 = $800 
10 units x $204 = $2,040 
7 units x $208 = $1,456 
6 units x $212 = $1,272 
2 units x $216 = $432

Total cost of ending inventory = $800 + $2,040 + $1,456 + $1,272 + $432 = $4,000

Therefore, the ending inventory on a FIFO basis is $4,024 (when rounded to the nearest dollar).

Use This Inventory Information for the Month of August to Answer