A company has 200 units of inventory at $10 each and 300 units at $15 each. If it sells 250 units using LIFO, what is the ending inventory value?
Practice Questions
1 question
Q1
A company has 200 units of inventory at $10 each and 300 units at $15 each. If it sells 250 units using LIFO, what is the ending inventory value?
$1,000
$1,250
$1,500
$1,750
Under LIFO, the last 250 units sold are from the $15 batch (300 units), leaving 50 units at $15 and 200 units at $10. Ending inventory = (50 * $15) + (200 * $10) = $750 + $2,000 = $2,750.
Questions & Step-by-step Solutions
1 item
Q
Q: A company has 200 units of inventory at $10 each and 300 units at $15 each. If it sells 250 units using LIFO, what is the ending inventory value?
Solution: Under LIFO, the last 250 units sold are from the $15 batch (300 units), leaving 50 units at $15 and 200 units at $10. Ending inventory = (50 * $15) + (200 * $10) = $750 + $2,000 = $2,750.
Steps: 10
Step 1: Identify the total inventory. The company has 200 units at $10 each and 300 units at $15 each.
Step 2: Calculate the total number of units available for sale. Total units = 200 + 300 = 500 units.
Step 3: Determine how many units were sold. The company sold 250 units.
Step 4: Understand the LIFO method. LIFO means 'Last In, First Out', so the last units added to inventory are sold first.
Step 5: Start selling from the most recent inventory. The last 300 units are at $15 each, so the first 250 units sold will come from this batch.
Step 6: Calculate how many units are left in the $15 batch after selling 250 units. Remaining units = 300 - 250 = 50 units at $15 each.
Step 7: Note the remaining inventory. After selling, there are 50 units at $15 and 200 units at $10.
Step 8: Calculate the value of the ending inventory. Value = (50 units * $15) + (200 units * $10).
Step 9: Perform the calculations: 50 * 15 = 750 and 200 * 10 = 2000.
Step 10: Add the two values together to find the total ending inventory value: 750 + 2000 = 2750.
