Question

A company has inventory of 15 units at a cost of $12 each on August 1. On August 5, they purchased 10 units at $13 per unit. On August 12, they purchased 20 units at $14 per unit. On August 15, they sold 30 units. Using the FIFO periodic inventory method, what is the value of the inventory at August 15 after the sale?

Answer 1

Answer:

$210

Explanation:

FIFO means First-In, First-Out, so you basically sell your oldest inventory first.

Let's check the inventory history and value for each purchases:

- August 1: 15 units at $12/each

- August 5: +10 units at $13/each

- August 12: +20 units at $14/each

- August 15, -30 units

When they sell on August 15, the first 15 units of the order come from the August 1st inventory.  Then go the 10 units purchased on August 5.  Missing 5 units (30 - 15 - 10) to complete the order.   Those last 5 units come from August 12 purchase.

At the end, there are 15 units left in inventory, all from the purchase of August 12, at $14 each.

The value of the inventory is then: 15 units * $14/unit = $210