Question

At the end of January, Higgins Data Systems had an inventory of 650 units, which cost \(16 per unit to produce. During February the company produced 950 units at a cost of \)19 per unit. If the firm sold 1,150 units in February, what was its cost of goods sold (assume LIFO inventory accounting)?

Short answer

The cost of goods sold of the company assuming LIFO inventory accounting method is $21,250.

Step-by-step solution

Ending inventory in units

$\begin{array}{rcl}\mathrm{Ending}\mathrm{inventory}& =& \mathrm{Beginning}\mathrm{inventory}+\mathrm{Units}\mathrm{produced}-\mathrm{Sales}\mathrm{units}\\ & =& 650+950-1,150\\ & =& 450\end{array}$

Cost of goods sold assuming LIFO inventory accounting method

$\begin{array}{rcl}\mathrm{Cost}\mathrm{of}\mathrm{goods}\mathrm{sold}& =& \left(\mathrm{Beginning}\mathrm{units}\times \mathrm{Unit}\mathrm{price}\right)+\left(\mathrm{Units}\mathrm{produced}\times \mathrm{Unit}\mathrm{price}\right)-\left(\mathrm{Ending}\mathrm{units}\times \mathrm{Beginning}\mathrm{unit}\mathrm{price}\right)\\ & =& \left(650\times \$16\right)+\left(950\times \$19\right)-\left(450\times \$16\right)\\ & =& \$21,250\end{array}$