1215

Arlington, Inc. uses the first in, first out (FIFO) inventory cost flow assumption. Beginning inventory and purchases of refrigerated containers for Arlington were as follows:

	Units	Unit Cost	Total Cost
Beginning Inventory	20	$10,000	$200,000
Purchases, April	10	12,000	120,000
Purchases, July	10	12,500	125,000
Purchases, October	20	15,000	300,000

In November, Arlington sold 35 refrigerated containers to Johnson Company. What is the cost of goods sold assigned to the 35 sold containers?

A) $485,000.

B) $434,583.

C) $382,500.

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Under FIFO, cost of goods sold is the value of the first units purchased. The 35 units sold consist of the 20 units in beginning inventory, the 10 units purchased in April, and 5 of the units purchased in July. COGS = $200,000 + $120,000 + (5 × $12,500) = $382,500.

1215

	Units	Unit Price
Beginning Inventory	709	$2.00
Purchases	556	$6.00
Sales	959	$13.00
SGA Expenses	$2,649 per annum

What is the cost of goods sold using the average cost method and using the first in first out (FIFO) method?

Average Cost

FIFO

A) $3,604.02 $2,918.00

B) $4,142.02 $2,918.00

C) $3,604.02 $3,423.82

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Average cost = cost of goods available/total units available. COGS = Units sold × avg. cost = 959 × 3.7381 = $3,604.02.

FIFO COGS = (709 × 2) + (250 × 6) = $2,918.00

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What is the ending inventory level in dollars using the FIFO Method?

A) $1,744.20.

B) $1,836.00.

C) $3,604.02.

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Ending Inventory = 306 × 6 = $1,836.00.

1215

Given the following inventory data about a firm:

• Beginning inventory 20 units at $50/unit
• Purchased 10 units at $45/unit
• Purchased 35 units at $55/unit
• Purchased 20 units at $65/unit
• Sold 60 units at $80/unit

What is the inventory value at the end of the period using LIFO?

A) $1,225.

B) $1,575.

C) $3,450.

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Ending inventory equals 20 + 10 + 35 + 20 ? 60 = 25 of the first units purchased equals:

(20 units)($50/unit) + (5 units)($45/unit) =

$1,000 + $225 = $1,225