FIFO and LIFO Costs Under Perpetual Inventory System The following units of an i

Question

FIFO and LIFO Costs Under Perpetual Inventory System

The following units of an item were available for sale during the year:

The firm uses the perpetual inventory system, and there are 31,200 units of the item on hand at the end of the year.

a. What is the total cost of the ending inventory according to FIFO?
$

b. What is the total cost of the ending inventory according to LIFO?
$

Beginning inventory 21,600 units at $20.00 Sale 14,400 units at $40.00 First purchase 48,000 units at $25.20 Sale 36,000 units at $40.00 Second purchase 45,000 units at $26.40 Sale 33,000 units at $40.00

Explanation / Answer

a.  The total cost of the ending inventory according to FIFO:

Ending inventory = 21,600 + 48,000 + 45,000 - 14,400 - 36,000 - 33,000 = 31,200
Cost of the ending inventory (FIFO) = 31,200 X $26.40 = $823,680

B.  The total cost of the ending inventory according to LIFO:

Cost of the ending inventory = (21,600 - 14,400) X $20 + (48,000 - 36,000) X $25.20 + (45,000 - 33,000) X $26.40
= $763,200

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