A sneaker outlet has made the following wholesale purchases of new running shoes: 12 pairs at $45, 18 pairs at $40 and 20 pairs at $50. An inventory taken last week indicates that 23 pairs are still in stock. Calculate the cost of this inventory by FIFO.
To calculate the cost of the inventory using the FIFO (First-in, First-out) method, you would need to assign the costs of the purchases to the units remaining in stock in the order they were purchased.
First, let's calculate the total number of pairs purchased:
Total pairs purchased = 12 pairs + 18 pairs + 20 pairs
Total pairs purchased = 50 pairs
Next, let's determine the cost of each pair:
For the first purchase of 12 pairs at $45 per pair, the total cost is:
12 pairs * $45/pair = $540
For the second purchase of 18 pairs at $40 per pair, the total cost is:
18 pairs * $40/pair = $720
For the third purchase of 20 pairs at $50 per pair, the total cost is:
20 pairs * $50/pair = $1000
Now, we need to allocate the costs to the remaining 23 pairs in stock based on the FIFO method.
First, we'll assign the cost of the first purchase:
12 pairs * $45/pair = $540
Next, we'll assign the cost of the second purchase:
Remaining pairs = 23 pairs - 12 pairs = 11 pairs
So, we'll assign the cost of 11 pairs from the second purchase: 11 pairs * $40/pair = $440
Lastly, we'll assign the cost of the third purchase:
Remaining pairs = 11 pairs - 11 pairs = 0 pairs
Therefore, there are no pairs remaining from the third purchase.
Now, let's calculate the total cost of the inventory:
Total cost of the inventory = Cost of the first purchase + Cost of the second purchase
Total cost of the inventory = $540 + $440 = $980
So, the cost of the inventory by FIFO is $980.
To calculate the cost of the inventory using the FIFO (First-In, First-Out) method, we need to determine the cost of the shoes based on the order in which they were purchased.
First, let's calculate the cost of the shoes purchased at $45 per pair:
12 pairs at $45 = $540
Next, let's calculate the cost of the shoes purchased at $40 per pair:
18 pairs at $40 = $720
Lastly, let's calculate the cost of the shoes purchased at $50 per pair:
20 pairs at $50 = $1000
Now, let's add up the costs from each purchase:
$540 + $720 + $1000 = $2,260
Therefore, the cost of the inventory using the FIFO method is $2,260.