Mathematics

Question

Using the LIFO method and the information in this image, what is the Cost of Units on Hand and Cost of Goods Sold during this period?
Using the LIFO method and the information in this image, what is the Cost of Units on Hand and Cost of Goods Sold during this period?

1 Answer

  • Answer:

    • On hand: $3,120
    • Sold: $14,480

    Step-by-step explanation:

    You want the LIFO cost of units on hand, and the cost of goods sold if there are 60 units on hand that cost $52 and the total cost of all units was $17,600.

    LIFO

    LIFO means "last in, first out". That is the oldest units remain in inventory to be the last ones sold. Here, the oldest units are from the first purchase, and are worth $52 each. There are 60 of them on hand, for a value of ...

      units on hand = 60 × $52 = $3,120 . . . cost of units on hand

    Goods sold

    The remaining 240 units of the 300 purchased are goods that were sold. The total purchase was $17,600, so the cost of the goods that were sold is ...

      $17,600 -3,120 = $14,480 . . . cost of goods sold

    __

    Additional comment

    We could work backward through the purchases to find the cost of the 240 units sold. That would be the sum of the $6400 for the last 100, $6000 for the 100 previous to that, and $52 each for the 40 units sold from the first purchase.

    Here, that arithmetic is made much easier by the fact that only 60 units from the first purchase remain in inventory. We can compute the value of remaining inventory and subtract that from the value of goods purchased to find the value of goods sold.

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