Question

The following is your inventory records for the past 4 months (with month 0 = today): Month: -4 -3 -2 -1 0 (today) Beg. Inventory 0 2 6 8 9 Receipts 2 7 2 2 2 On Hand 2 9 8 10 11 Order Releases 0 3 0 1 0 End Inventory 2 6 8 9 11 Use Table 3.3 on page 99 of the textbook for historical material costs. Today you were asked to quote the material cost for an order of 7 units. If you use LIFO accounting, what is the total material cost for the 7 units. The answer format is XX without the "$" symbol.

Answer 1

LIFO Method of Valuation of Inventories
Month	-4	-3	-2	-1	0 (today)
Beg.Inventory	0	2	6	8	9
Receipts	2	7	2	2	2
On Hand	2	9	8	10	11
Order release	0	3	0	1	0
End Inventory	2	6	8	9	11
Computation of composition of Historical Cost of the Ending Units available i.e. 11 Unite under LIFO Method :
Historical Cost	2 (-4 , 1-2)	for 2 units 2 (-4 , 1-2)	for 2 units 2 (-4 , 1-2)	for 2 units 2 (-4 , 1-2)	for 2 units 2 (-4 , 1-2)
		and for 4 Units 7 (-3 , 7-8)	for 4 Units 7 (-3 , 7-8)	for 4 Units 7 (-3 , 7-8)	for 4 Units 7 (-3 , 7-8)
			and for 2 Units 11.10 (-2   1-2)	for 2 Units 11.10 (-2   1-2)	for 2 Units 11.10 (-2   1-2) ,
				and for 1 Unit for 11.25 (-1 , 1-2)	for 1 Unit for 11.25 (-1 , 1-2) ,
					and for 2 Units for 12 (0 , 1-2)
Now we can compute the total Material Cost for the 7 units of pending Order today
Quote for Material Cost for an order of 7 Units:
Last In First Out (LIFO)
Therefore for 7 units order
	Unit Cost	Total Cost
2 units Cost	12	24
1 Unit Cost	11.25	11.25
2 units Cost	11.1	22.2
2 units Cost	7	14
Total Material Cost		71.45
Average Unit Cost		10.20714286	71.45/7 units
The total Material Cost for the 7 units under LIFO method using historical Cost as base for valuation will be 71.45 or approximately 72.