Question

A company reports the following beginning inventory and two purchases for the month of January. On January 26, the company sells 350 units. Ending inventory at January 31 totals 150 units.

	Units	Unit Cost
Beginning Inventory on Jan 1	320	$3.00
Purchase on Jan 9	80	3.20
Purchase on Jan 25	100	3.34

Required

Assume the perpetual inventory system is used and then determine the costs assigned to ending inventory when costs are assigned based on the FIFO method. (Round per unit costs and inventory amounts to cents.)

Short answer

Ending inventory totals$494.

Step-by-step solution

Definition of FIFO

The method of allocating the cost of the inventory of the business under which cost incurred in acquiring the oldest inventory is allocated first to the cost of goods sold is known as FIFO.

Calculation of Cost Assigned to Ending Inventory

Particular	Beginning Inventory/Purchases			Cost of goods sold			Ending Inventory
	Unit	Per unit Cost	Total	Unit	Per unit Cost	Total	Unit	Per unit Cost	Total
Beginning Inventory	320	$3	$960				320	$3	$960
9 Jan	80	$3.20	$256				320	$3	$960
							80	$3.20	$256
25 Jan	100	$3.34	$334				320	$3	$960
							80	$3.20	$256
							100	$3.34	$334
26 Jan				320	$3	$960
				30	$3.20	$96	50	$3.20	$160
							100	$3.34	$334