According to the FIFO (First-In, First-Out) method, the assumption is that the first units purchased are the first ones sold. So, the cost of the ending inventory is based on the most recent purchases.
To calculate the total cost of the ending inventory according to FIFO, we need to determine the cost of the remaining units from the second purchase and the cost of the 14 units on hand at the end of the year.
For the second purchase, we have 27 units at $43, so the cost of the remaining units is 27 - 19 = 8 units.
The cost of the 14 units on hand at the end of the year is 14 units at $43.
Now, let's calculate the total cost of the ending inventory according to FIFO:
Total cost = (Cost of remaining units from second purchase) + (Cost of 14 units on hand)
Total cost = (8 units * $43) + (14 units * $43)
Total cost = $344 + $602
Total cost = $946
So, the total cost of the ending inventory according to FIFO is $946.
Now let's calculate the total cost of the ending inventory according to LIFO (Last-In, First-Out) method.
According to the LIFO method, the assumption is that the most recent units purchased are the first ones sold. So, the cost of the ending inventory is based on the earliest purchases.
To calculate the total cost of the ending inventory according to LIFO, we need to determine the cost of the remaining units from the first purchase and the cost of the 14 units on hand at the end of the year.
For the first purchase, we have 20 units at $40, and 17 units were sold, so the cost of the remaining units is 20 - 17 = 3 units.
The cost of the 14 units on hand at the end of the year is 14 units at $40.
Now, let's calculate the total cost of the ending inventory according to LIFO:
Total cost = (Cost of remaining units from first purchase) + (Cost of 14 units on hand)
Total cost = (3 units * $40) + (14 units * $40)
Total cost = $120 + $560
Total cost = $680
So, the total cost of the ending inventory according to LIFO is $680.
Hope that helps!
