T-Shirt City uses a periodic inventory system. During the first year of operations, the company made four purchases of a particular product. Each purchase was for 500 units and the prices were: $9 per unit in the first purchase, $10 per unit in the second purchase, $12 per unit in the third purchase, and $13 per unit in the fourth purchase. At year-end, 650 of these units remained unsold. Compute the cost of goods sold under the FIFO method and LIFO method, respectively.
A) $13,700 (FIFO) and $16,000 (LIFO).
B) $8,300 (FIFO) and $6,000 (LIFO).
C) $16,000 (FIFO) and $13,700 (LIFO).
D) $6,000 (FIFO) and $8,300 (LIFO).

Question

Quizplus · Accepted Answer

Under FIFO, the oldest costs are assigned to COGS, so 1350 units (2000 total - 650 unsold) are from the first three purchases: 500@$9, 500@$10, 350@$12 = $13,700. Under LIFO, the newest costs are assigned to COGS, so 1350 units are from the last three purchases: 500@$13, 500@$12, 350@$10 = $16,000.

T-Shirt City Uses a Periodic Inventory System