Using the FIFO method of inventory pricing, what is the dollar value ending inventory if there were 300 units on hand December 31?
Auto Parts annual inventory of Windshield Wipers:
January 1, Beginning inventory 300 [email protected]
March 15 Purchase 15o units @ 10.50
June 10 Purchase 200 [email protected]
September 22 Purchse 175 [email protected]
December 10 Purchase 100 units @ 12.oo
a)3188 b)3219 c)3350 d)3600
To calculate the ending inventory value using the FIFO method, we need to determine which units were sold first and which units remain in inventory.
Here's the step-by-step calculation:
1. Calculate the total units purchased throughout the year:
Beginning inventory (January 1): 300 units
March 15 purchase: 150 units
June 10 purchase: 200 units
September 22 purchase: 175 units
December 10 purchase: 100 units
Total units purchased = 300 + 150 + 200 + 175 + 100 = 925 units
2. Determine the units sold during the year:
The total units available for sale = beginning inventory + total units purchased = 300 + 925 = 1225 units
Units remaining in inventory = total units available for sale - units sold
To find the units sold, we need to subtract the units on hand at the end of the year (December 31).
Therefore, units sold = total units available for sale - units on hand (Dec 31) = 1225 - 300 = 925 units
3. Calculate the dollar value of the ending inventory:
To find the dollar value of the ending inventory, we need to multiply the remaining units (300) by their respective prices:
Remaining units (Dec 31): 300 units
Price per unit (last purchase on December 10): $12.00
Dollar value of the ending inventory = Remaining units * Price per unit = 300 * $12.00 = $3,600
So, the correct option is d) $3,600.
To find the ending inventory value using the FIFO (First-In, First-Out) method, you need to start by accounting for the units sold throughout the year.
Here is the breakdown of units sold:
Units sold from January 1 to March 15: 150 units
Units sold from March 16 to June 10: 200 units
Units sold from June 11 to September 22: 175 units
Units sold from September 23 to December 10: 100 units
Now let's calculate the ending inventory:
1. Calculate the Cost of Goods Sold (COGS):
COGS = Units sold x Cost per unit
For the first sale (150 units), you will use the cost from the oldest purchase:
150 units x $11.00 = $1650
For the second sale (200 units), you will use the cost from the next oldest purchase:
200 units x $10.50 = $2100
For the third sale (175 units), you will use the cost from the next oldest purchase:
175 units x $10.75 = $1881.25
For the fourth sale (100 units), you will use the cost from the most recent purchase:
100 units x $10.00 = $1000
Adding up the COGS for each sale: $1650 + $2100 + $1881.25 + $1000 = $6631.25
2. Calculate the ending inventory value:
Ending Inventory Value = Units on hand x Cost per unit
Since there were 300 units on hand on December 31, you need to determine the cost per unit based on the remaining units in inventory.
The cost per unit for the remaining units will be the cost of the most recent purchase:
100 units x $12.00 = $1200
Therefore, the ending inventory value is $1200.
Comparing the options given:
a) 3188
b) 3219
c) 3350
d) 3600
Based on the calculations, the correct answer is not provided among the options.