A company has 100 units of inventory purchased at $5 each and 50 units purchased at $8 each. If it sells 80 units using FIFO, what is the ending inventory value?
Practice Questions
1 question
Q1
A company has 100 units of inventory purchased at $5 each and 50 units purchased at $8 each. If it sells 80 units using FIFO, what is the ending inventory value?
$200
$240
$280
$400
Under FIFO, the first 80 units sold are from the $5 batch (100 units), leaving 20 units at $5 and 50 units at $8. Ending inventory = (20 * $5) + (50 * $8) = $100 + $400 = $500.
Questions & Step-by-step Solutions
1 item
Q
Q: A company has 100 units of inventory purchased at $5 each and 50 units purchased at $8 each. If it sells 80 units using FIFO, what is the ending inventory value?
Solution: Under FIFO, the first 80 units sold are from the $5 batch (100 units), leaving 20 units at $5 and 50 units at $8. Ending inventory = (20 * $5) + (50 * $8) = $100 + $400 = $500.
Steps: 10
Step 1: Identify the total inventory. The company has 100 units at $5 each and 50 units at $8 each.
Step 2: Calculate the total number of units available for sale. This is 100 + 50 = 150 units.
Step 3: Understand the FIFO method. FIFO stands for 'First In, First Out', meaning the first units purchased are the first ones sold.
Step 4: Determine how many units are sold. The company sells 80 units.
Step 5: Sell the first 80 units from the $5 batch. Since there are 100 units at $5, all 80 units sold come from this batch.
Step 6: Calculate how many units are left after the sale. After selling 80 units from the $5 batch, there are 100 - 80 = 20 units left at $5.
Step 7: Note the remaining inventory. The remaining inventory consists of 20 units at $5 and 50 units at $8.
Step 8: Calculate the value of the ending inventory. This is done by multiplying the remaining units by their respective prices: (20 units * $5) + (50 units * $8).
Step 9: Perform the calculations: 20 * $5 = $100 and 50 * $8 = $400.
Step 10: Add the two values together to find the total ending inventory value: $100 + $400 = $500.
