Question

CHAPTER 6 1. Which of the following is NOT an inventory costing method? A) specific identification B) lower of cost or market C) last-in, first-out D) first-in, first-out 2. Which of the following inventory costing methods is based on the actual cost of each particular unit of inventory? A) specific identification B) weighted average C) last-in, first-out D) first-in, first-out 3. Which of the following inventory costing methods uses the cost of the oldest purchases to compute the cost of goods sold? A) specific identification B) weighted average C) last-in, first-out D) first-in, first-out 4. A company purchased 500 units for $30 each on January 31. It purchased 550 units for $33 each on February 28. It sold a total of 650 units for $45 each from March 1 through December 31. What is the cost of ending inventory on December 31 if the company uses the first-in, first-out (FIFO) inventory costing method ? A) $13,200 B) $10,200 C) $12,000 D) $1,800

Answer 1

	Chapter 6
	1)	Correct Option : B Lower Of Cost or Market
		Lower of cost or market is the inventory valuation method, it is not an inventory costing method.
	2)	Correct Option A Specific Identification
		Specific Identification method is based on actual cost of each particular unit of inventory.
	3)	Correct Option : C Last In, First Out
		In last in first out it assume that unit which was purchased recently were sold firstly
		consequently for costing of inventory it uses old purchase rate.
	4)	Closing Units = 500+550 -650
			=400 Units
		therefore value of inventory using first in first out method =400 units *33
		=$13200
		Therefore correct option is A