Mahalyk's Water Fun Shoppe specializes in jet skis. Mahalyk's inventory records showed the following for the past year.
Purchase Date Number of Jet Skis Cost Per Jet Ski
February 10 30 $4,000
May 12 80 $3,000
June 15 20 $3,500
July 20 15 $2,500
Use the FIFO method to determine Mahalyk's value of ending inventory at the end of July if they had 70.5 jet skis left in inventory.
A. $230,625
B. $210,000
C. $255,000
D. $212,500
I chose "C" is this correct? Thanks in advance!
To determine the value of ending inventory using the FIFO (First-In, First-Out) method, you need to follow these steps:
1. Start by arranging the purchases in chronological order, from the earliest to the latest:
- February 10: 30 jet skis purchased at $4,000 each
- May 12: 80 jet skis purchased at $3,000 each
- June 15: 20 jet skis purchased at $3,500 each
- July 20: 15 jet skis purchased at $2,500 each
2. Calculate the total number of jet skis purchased throughout the year. This will be the sum of the jet skis purchased in each transaction:
30 + 80 + 20 + 15 = 145 jet skis
3. Determine the total cost of the jet skis purchased throughout the year. To do this, multiply the number of jet skis purchased in each transaction by their respective cost, then sum up the results:
(30 * $4,000) + (80 * $3,000) + (20 * $3,500) + (15 * $2,500) = $1,200,000
4. Calculate the cost per jet ski by dividing the total cost of the jet skis purchased by the total number of jet skis:
$1,200,000 / 145 = $8,275.86 (rounded to two decimal places)
5. Finally, calculate the value of the ending inventory by multiplying the cost per jet ski by the number of jet skis left in inventory:
$8,275.86 * 70.5 = $583,661.54
Therefore, the correct answer is not listed among the options you provided. The value of Mahalyk's ending inventory at the end of July, using the FIFO method, is approximately $583,661.54.