The Candle Shop -Annual Inventory of candles.
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Jan 1 Beg Inventory 5,000 units @$0.89
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Feb 15 Purchase 10,000 units @ $0.69
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April purchase 2,000 units @ $1.09
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July 15 purchase 4,000 units @ $ 0.99
________________________________________Oct 15 purchase 1,000 units @$1.19
________________________________________Dec 15 purchase 2,000 units @$1.09
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Using the FIFO method of inventory pricing, what is the dollar value of ending inventory if there were 17,000 units on hand on Dec 31?
Someone please help this is very tough question I have know idea if you could show all your work and explian it to me thanks for your time
The total number of units purchased was 24,000. Since there were 17,000 sold by Dec. 31, 7,000 were sold.
With FIFO (First In, First Out) accounting, the 7000 units sold would be the first 7000 bought, which would be 5000 at 0.89 and 2000 at 0.69 per unit. That cost would be $5830.
Subtract that amount from the total amount spent for inventory and you will have the dollar value of remainign inventory.
To find the dollar value of ending inventory using the FIFO (First In, First Out) method, we need to determine the cost of the most recent units purchased until we reach the desired quantity on hand.
Let's break down the information given:
1. Beginning Inventory (Jan 1):
- Quantity: 5,000 units
- Cost per unit: $0.89
2. Purchases:
- Feb 15: 10,000 units @ $0.69
- April: 2,000 units @ $1.09
- July 15: 4,000 units @ $0.99
- Oct 15: 1,000 units @ $1.19
- Dec 15: 2,000 units @ $1.09
Now, let's calculate the dollar value of ending inventory:
1. Feb 15 purchase (10,000 units):
- Quantity remaining in ending inventory: 7,000 units (17,000 - 10,000)
- Cost per unit: $0.69
- Dollar value: 7,000 units * $0.69 = $4,830
2. April purchase (2,000 units):
- Quantity remaining in ending inventory: 5,000 units (7,000 - 2,000)
- Cost per unit: $0.69 (This is the cost associated with the Feb 15 purchase; FIFO method assumes earlier units are sold first)
- Dollar value: 5,000 units * $0.69 = $3,450
3. July 15 purchase (4,000 units):
- Quantity remaining in ending inventory: 1,000 units (5,000 - 4,000)
- Cost per unit: $0.69 (This is the cost associated with the Feb 15 purchase; FIFO method assumes earlier units are sold first)
- Dollar value: 1,000 units * $0.69 = $690
Since we have reached the desired quantity on hand (Dec 31), we can stop here.
Finally, let's calculate the dollar value of ending inventory:
1. Oct 15 purchase (1,000 units) and Dec 15 purchase (1,000 units):
- Quantity: 1,000 units from each purchase (total 2,000 units)
- Cost per unit: $1.19 (This is the cost associated with the Oct 15 purchase; FIFO method assumes earlier units are sold first)
- Dollar value: 2,000 units * $1.19 = $2,380
Now, let's sum up the values calculated to find the total dollar value of ending inventory:
$4,830 + $3,450 + $690 + $2,380 = $11,350
Therefore, the dollar value of ending inventory using the FIFO method is $11,350.